President Pranab Mukherjee hits out at MNCs for their intent to dodge tax
April, 30th 2013
President Pranab Mukherjee on Monday slammed multinational companies saying they only looked for oversees locations with an intention to dodge taxes, raising eyebrows at a time when the country is desperately wooing foreign capital to plug a widening current account deficit.
Addressing a function at the National Academy of Direct Taxes (NADT), Mukherjee said more than three-fourths of business transactions nowadays took place through the units of MNCs. "Their basic objective is to locate a unit in countries where the rates of tax are the lowest. Many are not physically located in a country but operate with an objective to evade and avoid tax in the tax havens," Mukherjee said.
During his stint as finance minister, Mukherjee had scared MNCs to the sidelines after making retrospective changes in tax laws and unveiling the General Anti-Avoidance Rules (GAAR) to fight tax evasion. Mukherjee, as finance minister, had linked the Vodafone tax issue to the government's fight against black money.
The Vodafone tax case had led to sharp division within the government. P Chidambaram, who took charge of the finance ministry last September, reversed a number of decisions taken by his predecessor, boosting investor confidence. The government put off implementation of GAAR and is weighing options on resolving the Rs 13,000 crore Vodafone tax issue.
Mukherjee, in his speech said there was a time when getting information through the banking channels of foreign countries was very difficult. However, as an indirect impact of the international financial catastrophe of 2008, many such countries were compelled to divulge information, which had made the taxman's job much easier. "However, it continues to be a complex situation, especially on issues like transfer-pricing. It is a constant battle of wits and legal procedures," the president said.
The I-T department has slapped several tax demands over transfer-pricing issues on several MNCs such as Shell India and Vodafone. Shell India has challenged the tax demand in Bombay High Court.
The fresh tax demands against MNCs have come at a time when the government has launched a determined bid to attract foreign investment. Chidambaram has led the efforts holding roadshows in several financial centres in Asia, Europe and the United States. He has tried to convince foreign investors about the India growth story and is scheduled to meet investors in Australia and Qatar.