Amidst a welter of concern over new retrospective tax demands, Union finance minister Arun Jaitley on Monday sought to reassure foreign investors that he was considering a committee to explore ‘what can be done to resolve the past, and move beyond’ to ensure certainty.
Writing in ‘Financial Times’, Jaitley said it was ‘ironic’ and ‘disappointing’ that tax issues were damaging his governmnt’s credentials at a time when it was on the ‘cusp’ of modernising and rationalising tax policies.
Noting that his government did not challenge recent court verdicts that went in favour of foreign companies, Jaitley admitted that “we have not been entirely successful in convincing investors of the fairness of our tax system”.
Referring to the new cases of ‘unexpected’ tax demands that had cropped up, he wrote that the most recent was the minimum alternative tax (MAT), which had long been imposed on domestic companies.
Jaitley wrote: “The decision to levy MAT on foreign portfolio investors, for example, was taken not by the government but by quasi-judicial bodies. These were created — well before the present government came to power — to reassure investors that the tax system would be free of political interference”.
He added: “Even though it is only the legacy issues that haunt us, we recognise 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”.
“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”.
In the current parliamentary session, he wrote that the constitution would be amended to implement reform of indirect taxes in the form of a value added tax (the so-called goods and services tax).