Government Mulling High Level Panel On Tax Issues: FM Arun Jaitley


LONDON: Seeking to contain the adverse fall out of MAT levy on foreign investors, Finance Minister Arun Jaitley said the Indian government will set up a high- level committee to sort out the taxations issues of the past and make the system predictable.

"Even though it is only the legacy issues (concerning taxation) that haunt us, we recognize that we must put a quick end to them.

"I am considering a high-level committee to explore what can be done to resolve the past, and move beyond it in a way that would provide real predictability and certainty to investors," he wrote in an opinion piece in Financial Times.

"This committee will be instructed to report back expeditiously so that early actions can be taken. We have fashioned tax policies for the 21st century. Our tax administration cannot afford to lag behind. We will not let it," Jaitley said.

He said the disputes now attracting attention are legacy cases, which are tax demands arising from actions that the tax authorities and the judiciary took before NDA government came to power.

Explaining the levy MAT on foreign portfolio investors, Jaitley said the decision was taken not by the government but by quasi-judicial bodies, which were created - well before the present government came to power - to reassure investors that the tax system would be free of political interference.

Following a ruling by the AAR, the revenue department has sent notices to 68 foreign institutional investors (FIIs) for payment of dues totalling Rs 602.83 crore towards Minimum Alternate Tax (MAT).

"However, we have made clear that these rulings can be contested in higher courts, which will respect due process and have the power to quash faulty decisions. We also made clear that our international tax treaties cannot be overridden by these rulings," Jaitley said.

He said since some of the rulings of quasi judicial bodies went in favour of foreign investors, the tax department had little choice but to respect these decisions.

"The rule of law cuts both ways. We cannot say it is undermined when we take retroactive actions, and at the same time seek to override, retroactively, the decisions of our institutions," Jaitley said.

He said the 2015-16 Budget has done away with taxation which could be construed as unfriendly to investors.

While general anti-avoidance rules has not been implemented, minimum taxes on foreign portfolio investors have been removed.

And perhaps most significantly, when the courts decided in favour of Vodafone and Shell in their long-running multibillion tax disputes with the Indian government, we did not challenge their verdicts, he said.

"Yet we have not been entirely successful in convincing investors of the fairness of our tax system. New cases of unexpected tax demands have cropped up, the most recent one being the MAT," he said.

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Source: PTI