Legitimate demands not tax terrorism: FM

Says India not a tax haven, dues have to be paid if demands are right

Finance Minister Arun Jaitley on Monday said India’s tax regime wasn’t confrontational, but added legitimate demands by the Income Tax Department had to be paid. He said there were challenges on the road towards reforms in the tax regime.

“We are not a tax haven and we don’t expect to be one. India is not so vulnerable that every legitimate demand can be termed tax terrorism,” Jaitley said at the annual session of the Confederation of Indian Industry (CII). He added if a company or a defaulting party lost an appeal in court, that couldn’t be termed “tax terrorism”.

Budget 2015-16 had announced foreign institutional investors (FIIs) would be exempt from minimum alternate tax (MAT) from 2015-16. However, several MAT notices have been issued to FIIs for assessment year 2011-12 and earlier. Overall, pending MAT demands from the tax department are said to stand at about Rs 37,000 crore.

Last month, British oil and gas explorer Cairn Energy Plc received a tax demand of about Rs 10,000 crore. The company is seeking arbitration and has invoked an India-UK bilateral investment protection agreement to demand compensation.

On the notices sent to FIIs, Revenue Secretary Shaktikanta Das, also present at the CII event, said some of them had approached the Authority for Advance Rulings, which said MAT was applicable. “I think what FIIs and FPIs (foreign portfolio investors) are asking for is retrospective exemption, not retrospective application of a tax law. As MAT was leviable on them, these assessments, these demands have been raised,” Das said.

Jaitley also said the government would take additional steps to make doing business easier. He said he was considering a committee of experts to study the feasibility of substituting multiple prior permissions for setting up businesses with a regulatory mechanism. “One of the decisions announced in the Budget that has gone unnoticed is to see whether the regime of prior permissions is to be substituted by a regulatory mechanism. The regulatory mechanism sets in only when you violate the guidelines of doing business. I intend to appoint an expert committee soon.”

He sought suggestions for improving a compliance window proposed by the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015.

“A very reasonable compliance window would come for those who indulged in misadventure in the past. If some reasonableness is required, the government or Parliament or the legislature will be open to reasonable suggestions which will be welcomed in these matters.”

He said considering the efforts being made globally by the US and organisations such as the G20 to deal with black money, it would be difficult for anyone to hide foreign assets. “Through the next two-three years, the G20 initiative for automatic exchange of information is going to take shape. India will become a signatory to the Foreign Account Tax Compliance Act. Subsequently, not only the US, other countries inter-se would also discharge their obligation to each other.”

The minister promised to look at the provisions of the Prevention of Corruption Act in light of the recommendations of the Law Commission. “There are many other challenges that relate to the decision-making process being fair but also fearless,” he said, adding the Act was, in its current form, deterring civil servants from taking decisions. “The law commission has sent a recommendation that in the changed environment, it requires a re-look. Therefore, a large number of criminal cases, both against industry and decision makers, which have in the past few years disrupted the economic and business environment of this country, require to be seriously addressed by looking at the language of the Act,” he said.

“I urge everybody, including industry, to set up some working groups and assist in the process of this debate as to what kind of changes is required where errors in decision making can be contra-distinctly dealt with from corruption in decision making. Both require to be dealt with separately,” he added.

Jaitley reiterated he was hopeful the goods and services tax (GST) Bill would be tabled in Parliament this year. “Through the next few weeks, I intend to move a constitutional amendment Bill for implementation of GST. Once it is approved, the next stage will be getting the approval of various states. Then, all subordinate amendments drafted, circulated and accepted by all state governments will be presented before Parliament in the course of the year,” he said.

The minister criticised the United Progressive Alliance government’s land Bill, terming it “anti-poor”. “I firmly believe the 2013 land law is hugely detrimental to rural India. It is the most unfriendly piece of legislation as far as rural India is concerned. It does not provide any space for rural infrastructure,” Jaitley said.