Unsustainable tax demand will only earn a bad name: FM

His comments come in the wake of HC wherein I-T Dept lost its Rs 18,000-cr transfer pricing cases against oil major Shell India

Finance Minister Arun Jaitley on Friday said an unsustainable tax demand would only earn the country a bad name as an investment destination, comments that come in the wake of tax department losing its battle against oil major Shell in Bombay High Court.

“Unsustainable demand won’t get you taxes. Unsustainable demands in the books can show you in good glory but eventually those taxes will be blocked in some judicial court proceedings...they would have only earned us a bad name as an investment destination,” Jaitley said at the HT Leadership Summit. He, however, maintained those who are supposed to pay taxes must pay.

Referring to retrospective amendments to the tax laws by the United Progressive Alliance (UPA) government, Jaitley said, if it is not investor-friendly, people will start looking elsewhere.

He said making the taxation regime investor-friendly and streamlining the procedure for land acquisition were the big challenges facing the government.

“Undoing a lot of taxation decisions is quite challenging but that necessarily does not involve a legislative action. Only some areas require action,” he said.

Jaitley, however, took comfort from the fact that taxation laws are the domain of the Lok Sabha, in which the National Democratic Alliance (NDA) has a majority.

When asked for the three specific reforms he would like to get passed in the ensuing winter session of Parliament, Jaitley said he would like insurance, coal laws and Goods and Services Tax (GST) to be cleared.

He said there were political risks to reforms and those in the government would have to adequately blend the economic reforms with politics.

On unaccounted money in the country, he said, real estate, jewellery market, luxury market and mining are the sectors in which they are prevalent. The minister said he had asked the chief commissioners of direct taxes to look into these sectors.

Regarding black money stashed abroad, he said his government would legally follow the right course.

“If you make an adventurist step and make every name available, without any supporting evidence, breach your international treaties, you are not going to be only disadvantaged by future non-cooperation, but also nobody will want to provide you with supporting evidence,” he said.

On privatisation, he said, principally he has always been for privatisation in sectors where government can get out.

“Not only the mindset of polity has to change but also all other agencies will have to change,” he said, adding the civil servants cannot work in an oppressive environment.

“While our accountability norms have to be very tight but the government taking commercial decision can never do it in an oppressive environment. As part of our reform process, we will also have areas which at some stage require to be considered by the larger political system,” he said.

Jaitley also said government would be able to meet the direct tax target, though indirect tax remains a “challenge” as manufacturing sector was a great source of worry.

The finance minister also expressed concern over banks become defensive in lending in the wake of high stressed assets.

He said non-performing asset had come down to two per cent of the total advances after the implementation of the Sarfaesi (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act but have now again risen to five per cent.