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What is due must be paid, India no tax haven
April, 07th 2015

In a strongly worded message, finance minister Arun Jaitley has said India is not a tax haven and levy of any legitimate taxes should be not be perceived as tax terrorism, countering charges levelled by a section of foreign investors after tax authorities raised thousands of crores in minimum alternate tax on foreign portfolio investors.

"Our fairness has been partly misunderstood. The converse of tax terrorism is not a tax haven.....Let it be clearly understood that India is not so vulnerable that every legitimate tax demand can be considered as tax terrorism, because we are not a tax haven and we don't intend to be one," Jaitley said a CII annual session on Monday.

The minister said taxes which are not payable, must not be paid, they should be challenged but taxes which are payable, must be paid.

"Therefore, even when legitimate taxes are demanded where courts have settled issues, even though the demand may be of the past, amendments have been made for the future. If people are aggrieved, they have the right to challenge it, but having lost in court you can't refer to the process as tax terrorism," he said responding to a furore following tax demand notices to over 100 foreign portfolio investors for about Rs 60,000 crore minimum alternate tax.

What is due must be paid, India no tax haven: Arun Jaitley

Revenue secretary Shaktikanta Das said this request should not be mixed up with retrospective application of a particular law or retrospectivity of the law.

"The legal position is very clear. The law will naturally apply for the prior period. The amendment, which has been proposed will take prospective effect on or after April 1, 2015. So prospectively, there will be no MAT on the FIIs or FPIs, but the prior period demand is confirmed by the Authorities for Advance Ruling. So naturally, it would stand," Das told reporters on the sidelines of the conference.

The budget for the current fiscal has clarified that capital gains on transactions in securities, which are liable to tax at a lower rate will not be subject to MAT. However, this provision has not been applied retrospectively, implying that benefit will be available from April 1, 2016.

The demand raised on foreign portfolio investors (PFIs) relates to the previous years.

The aim of the Government, Jaitley said, is to create a conducive business environment by addressing the challenges faced, especially with respect to taxation, the Land Acquisition and Rehabilitation and Resettlement bill, and corruption.

Jaitley said the language of the present prevention of corruption act, which was drafted in the pre-liberalisation era in 1988, is deterring a large number of public servants particularly civil servants from taking decisions.

He said the Law Commission had in its recommendations said the law required a re-look.

"The law commission has sent its recommendations that in the changed environment, it requires a re-look and therefore a large number of criminal cases, both against industry and decision makers, which have recently in the last few years disrupted the economic and business environment in this country required to be seriously addressed by looking at its language, "he said asking industry to set up some working groups and assist in the process of the debate as to what kind of changes are required where errors in decision making could be contra-distinct and dealt with separately from corruption in decision making.

"Both are required to be dealt with entirely separately," he said.

He said, when the government took over India's credibility as an investment destination and ability to take decisions was reasonably low and that's why one of the first decisions was to open up more sectors to FDI. The next challenge is to work to persuade investors to come in by simplifying and rationalizing procedures and rates in direct and indirect taxes.

"The direction of the road map is very clear....This year started with an uncertainty, saw a lot of excitement and now in the language of cricket, the 'slog period' begins, he said.

The minister said there is broad consensus as far as goods and services tax is concerned and the government will move the constitutional amendment for passage after the recess.

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