Retro tax hangs like Damocles' Sword in India: Microsoft

The company also said there was a need to overcome "trust deficit" over data security issues in India

Fear of retrospective taxation “hangs like a Damocles’ Sword” over the head of foreign firms doing business in India, global tech giant Microsoft said on Wednesday — joined by two other large American corporations to raise concerns about the country’s ‘uncertain’ tax regime.

Highlighting their concerns, top officials of the three global giants — Microsoft, General Electric (GE) and Lockheed Martin — were unanimous at a conference here in seeking predictability in taxation rules to encourage investments in the country.

GE and Lockheed Martin also called for removing inefficiencies in government tendering procedures and bidding processes, while Microsoft said there was a need to overcome “trust deficit” over data security issues in India.

“Tax hangs like a Damocles’ sword over our head and I’m not terribly sure whether it’s only American companies but I guess it’s every company in this country. That Damocles’ sword is that suddenly rules change and is retrospective,” Microsoft India Chairman Bhaskar Pramanik said at the ‘Accelerating Indo-US Trade’ conference.

Elaborating his point, he said: “If you come to me and tell me that I am going to increase your taxes by 35 per cent I have no issues. I will change my business model accordingly but if you come back and say for the last ten years I am going to charge you 35 per cent more, I have a problem and I can’t change that. I think this retrospective tax has still not disappeared.”

Expressing similar sentiments, GE South Asia President & Chief Executive Officer (CEO) Banmali Agrawala said taxation remains an issue for foreign companies, particularly American firms that “need comfort” from the Indian government.

“I think companies are willing to invest in this country like never before. Therefore they need a certain degree of predictability and comfort that revenue, which is legitimate and genuine will be taxed and there would not be undue pressures,” he added.

Lockheed Martin India CEO Phil Shaw also said the challenges that they see in India include those relating to the country’s taxation regime.

He said companies like Lockheed Martin would like to see some predictability in procurement particularly in the defence sector.

The comments come at a time when the National Democratic Alliance government is highlighting the work done by it in its first two years in various areas, including towards improving the ease of doing business in the country.

Commenting on data security issues, Pramanik said: “There is a trust deficit whether it is the Snowden reports or the current issues which we have. We need to balance the privacy of data with the security of the nation... One thing is very clear to us that if data is generated in this country, it should be based on the laws of this country and based on what is right for the Indian citizen.”

Stating that to question Microsoft’s credentials based on nationality is “sometimes a little peculiar”, as the company has been in India for 25 years, he said: “I think we need to build that trust with the current government.” Calling for transparency in government procurements, he said: “We are finding that the government is giving a lot of contracts but they have already made up their mind about how to go about certain things so the transparency is lacking. I think that is one thing which we need to focus on.”

Agreeing with him, Agrawala said: “The process of Government spending needs to be smoother, by that I mean the tendering procedures, the bidding processes, it needs to be faster, more predictable, smoother, so that it can result in more clear action and it doesn’t take decades for things to come to fruition.”