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03-27-2012, 09:27 AM #1
Anand J New Delhi March 26, 2012 Share14 STORY TOOLS Change font size Print
India's finance minister does not want the country to become a no-tax or a low-tax regime. Pranab Mukherjee said this in the context of protests from the industry about the decision to amend retrospectively the Income Tax Act with effect from April, 1962 , to tax deals involving overseas companies that have majority operations or interests in India.
"I am custodian of the money given by 120 crore people through taxation. Otherwise you will accuse me of not protecting government's right," Mukherjee said. The Parliament is expressing its right on legislation and creating a reference point in law, and double taxation avoidance agreements will protect industry from any unwarranted taxation.
Mukherjee was reacting to comments made by Rahul Bajaj, Chairman of Bajaj Holdings & Investment Ltd, at the National Council meeting of business lobby Confederation of Indian Industry in New Delhi on Sunday.
Bajaj, speaking on behalf of the industry, requested Mukherjee to look at other avenues for raising money like increasing taxes or look at increased disinvestment. Bajaj also said that though 98 per cent of the industry is not affected, they were worried about what will happen in future.
Mukherjee clarified that laws have always been amended in the context of Supreme Court judgements. "Every year, some amendments are introduced to enhance the clarity of the taxation regime." According to him, the government also needs to protect its own revenue in cases where tax has not been paid on the basis of the government's interpretation of the law.
Mukherjee said that this has precedence in Indian history as well as in other nations. "It is a constant practice across the world." He said, for instance, that there were nine retrospective laws in the 2008 budget. It was not a vindictive decision or keeping in mind a specific case. The tax department recently lost a case in the Supreme Court on its right to tax a 2007 acquisition deal between Vodafone Group and Hutchison International. The transaction saw Vodafone taking majority control of Hutchison Essar, now called Vodafone India.
"We are partners and there cannot be any trust deficit between the partners," Mukherjee said about the government's relations with the industry. He tried to assuage industry feelings by reminding that income tax rules stipulate that the cases cannot be reopened beyond six years. "There is no intention to re-open plethora of cases," he said.
Regarding the increase in excise duty increase in the budget, he reminded that the rates are still less than the 14 per cent existed in pre-economic crisis days. He said that the reduction then was a temporary adjustment as part of the financial stimulus package. With the goods and service tax, or GST, coming up, the minister said he wanted to align tax rates and that a consensus-building process with state governments was on.
The Parliamentary Standing Committee submitted its recommendations on the Direct Taxes Code, or DTC, only in early March and was late to study and include in this year's budget. He expressed confidence that legislation will happen this year and DTC will be implemented in full from the next financial year. He said that GST and DTC will help in mobilising additional resources.
Mukherjee also expressed his helplessness in pushing ahead with reforms. He said that the mindset that government can always deliver on its intentions needs to change. "In a multi-party democratic system, the government has to work with the consensus of its partners," he said.
The CII National Council meeting was attended by over 80 leading CEOs from Indian industry. The meeting was also attended by R Gopalan, Secretary, Economic Affairs; Kaushik Basu, Chief Economic Advisor; Sumit Bose, Secretary, Expenditure; and Mohammed Haleem Khan, Secretary, Disinvestments; among others.