Retrospective tax would be a costly misadventure: FM
Ruling out the use of retrospective taxation by the present administration, Finance Minister Arun Jaitley has said a permanent law in this regard is not possible and the cost would be “too heavy” if any future government indulges in such a “misadventure”. “As far as retrospective taxation is concerned, I think India’s experience of the 2011 law has been very adverse, and therefore if any government did indulge in that misadventure ever in the future, the cost involved will be too heavy,” Jaitley said.
He made the remarks while responding to a question on retrospective taxation system, an issue of concern for the American businesses. “What would you say to an investor who says, ‘I can trust you, Mr Jaitley, I can trust this government, but as long as that law remains on the books, how can I be sure that in seven years, or in eight years, or in 10 years, or 12, it is not misused by another government that does not share your intentions?” Jaitley was asked.
“I can’t override parliamentary sovereignty. I can’t bring a law that says Indian Parliament loses its right to ever enact a law retrospectively. Even if I did that, it would be illegal. Every legislature has that power,” Jaitley said in his reply.
“So any future parliament, or future government would have that power, but we’ve been doing our little bit in restating and re-emphasising that it was not a sensible decision to do so, and therefore I think the dangers of that retrospective legislation, and the context of which it was brought has been driven home,” he said. “Baring that one case which is pending under that law, or another case which has now arisen, I think most of the issues, we’ve already put them to rest, as far as retrospective legislation is concerned,” he added.
In his address to Peterson Institute for International Economics, Jaitley had said he is “acutely aware” that there are concerns about retrospective taxation, tax harassment and arbitrariness in tax administration. The finance minister had also highlighted that the Government did not contest the High Court orders that went in favour of Vodafone and Shell which, he said, reflected the Government’s commitment to not being adversarial.
Asked about the level of India’s risk from the external environment, given that the US Federal Reserve is poised to start raising rates this year, Jaitley replied, “International factors obviously have an impact. Considering the vast depth and size of the Indian market...our ability to absorb those shocks is far stronger.”
‘Only automatic info trade can hit black money’
Finan- ce Minister Arun Jaitley has sought urgent implementation of common reporting standards on automatic exchange of information globally, asserting that it is the only way to tackle the challenges posed by black money. The problem of offshore tax evasion and flow of illicit money can be addressed only by the free flow of financial account information exchanged among countries on an automatic basis, Jaitley said at the IMF-World Bank annual Spring Meeting.
“We strongly feel that there is a need to ensure that the Common Reporting Standards on Automatic Exchange of Information should be implemented on a fully reciprocal global basis and those countries which have not yet committed to the timeline of 2017 or 2018 should do it without any further delay,” he said. The problem of black money and illicit flow to offshore jurisdictions and tax havens can be addressed only if this is implemented at a global level, he asserted.