Review tax sops to SEZs: OECD

Supporting the finance ministry's view that tax exemptions to the developers and units in special economic zones are a drain on economy, the Organisation of Economic Cooperation and Development has asked the government to review tax exemptions in these areas.

"The work undertaken by OECD suggests that such schemes generate very little new investment and there are considerable advantages in ending such incentives," OECD Deputy Secretary General Pier Carlo Padoan said.

He said the government should review the tax concessions given to special economic zones, export processing areas and software technology parks. Opposing these tax exemptions, the finance ministry has estimated that revenue losses due to tax exemptions to SEZs would cross Rs 100,000-crore (Rs 1000 billion) mark over the next few years.

The ministry is looking at cutting down on various tax exemptions. The ministry has also favoured a cap on the total number of SEZs. The government has so far given formal approval to 339 SEZs and in-principle approval to 160 SEZs, which are being opposed by the farmers and certain political parties.

Padoan, who was in the capital to attend two-day international conference on tax, said such schemes have a tendency to distort the economy and do not result in sustainable tax revenues.

Our experience across different nations showed that such tax exemptions were helpful only at the initial stage of development, and considering India is already a mature economy, they are unlikely to achieve its objectives here, he added.