India-UK Trade Deal Sparks Debate Over Double Taxation Exemptions

The recently signed India-UK Free Trade Agreement has drawn attention due to its provisions on double taxation, particularly the exemption granted to Indian workers temporarily seconded to Britain. Under the agreement, these workers will not be required to pay National Insurance contributions in the UK for the first three years, instead continuing to contribute to India’s social security system. The same exemption applies to British workers relocating to India.

 

The exemption aims to prevent workers from being taxed twice for social security benefits they will not receive. However, critics argue that the policy creates a two-tier tax system, favoring Indian workers while reducing revenue for the UK Treasury. Some political figures have voiced concerns that the exemption could lead to an influx of Indian workers, potentially impacting local employment dynamics.

 

Supporters of the agreement emphasize that similar provisions exist in trade deals with other countries, including the US, EU, Canada, and Japan. They argue that the exemption ensures fairness for temporary workers and prevents unnecessary financial burdens. The UK government has defended the deal, stating that it will enhance trade relations and create economic opportunities for both nations.

 

The controversy surrounding the tax exemption highlights broader discussions on labor mobility and trade fairness. While the agreement is expected to boost bilateral trade and investment, its long-term impact on employment and taxation remains a subject of debate.

 

Trade Policy Insights:

Sources: Economic Times, Business Standard, Moneycontrol, Financial Express, UK Ministry of Trade.