Arbitration is not best way to resolve tax disputes: Das

Ahead of an inter-ministerial panel meeting to decide on government joining tax arbitrations like the one initiated by Cairn Energy of the UK, Revenue Secretary Shaktikanta Das today said arbitration was not the best way to settle international tax disputes.
"The developing countries, including India, feel that arbitration cannot be the best method for dispute resolution. Taxation is the sovereign function of every government," he said while addressing International Tax Conference organised by the PHD Chamber.
An inter-ministerial group (IMG) is likely to meet in mid next week to decide on the government stand of an arbitration notice slapped by British oil explorer Cairn Energy against a tax demand of Rs 10,267 crore raised on an eight-year old internal reorganisation.

"It is therefore desirable that when there is a tax issue, it's better that two governments sit together and resolve the matter through the Mutual Agreement Procedures (MAP) rather than involving a third party who arbitrates," Das said.
While the government has decided to join the arbitration initiated by Vodafone on a Rs 20,000-crore tax demand, it has so far resisted joining similar moves by Cairn as well as Nokia.
The focus on international taxation should be dispute resolution, he said, adding the government has taken lots of initiatives for dispute resolution.

The tax department has dedicated officials who deal with dispute resolution of both international and domestic taxations.

"I must say that our focus is to resolve as much problems as possible in the matters of international taxation through MAP and APA (Advance Price Agreements)," he said.
Das further said that India would soon be settling about 120 tax dispute cases related to US companies through MAP.
"We have reached a framework agreement under which already more than about 120 companies, tax specific US companies, which have tax related issues are getting settled. In about 2-3 months time about 120 companies' tax disputes would be resolved and we have monitored the progress of all these individual cases which are now being discussed and they will be resolved by the CBDT in its circular," he said.

Besides, he said, Advance Price Agreements (APAs) are becoming important and the government has finalised several such agreements.
"We have already finalised several APAs especially with companies from Japan. Japan has lot of investment interest in our country today. There is definitely perceptible improvement the way Japanese companies look at India for investment," he said.