Is India's tax terrorism back?
April 17, 2015  11:18
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Despite assuring foreign companies and investors that India would no longer engage in "tax terrorism' -- suddenly levying huge retrospective tax bills on corporations such as Vodafone, which was charged with more than $2 billion in back taxes in 2012, Finance Minister Arun Jaitley has now tried to argue that foreigners cannot expect India to be a tax haven, after the tax authorities issued notices to collect $6.4 billion in taxes from a group of 100 foreign institutional investors (FIIs) for the year 2012-13. 

'Modi's government is caught in its own trap,' writes Dhiraj Nayyar in BloombergView. 'It wants to stick to the letter of the law even as it acknowledges that those laws are counterproductive. 

'It's possible the prospect of extra revenue is too tempting to resist for a government looking to ramp up spending; Jaitley has said that he could use the $6.4 billion from foreign investors to solve India's irrigation problems. Or possibly, the government may be concerned about being labeled pro-business and is going out of its way to prove that it's not.' 

But, 'whatever the reason, the outcome threatens to torpedo investor confidence. What's needed is a dramatic overhaul of the tax code. Instead of applying bad laws indiscriminately, Jaitley and his taxmen should invest their energies in simplifying the system,' he says. 

We agree. You can read the full article here.
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