New Delhi: Finance Minister Arun Jaitley on Monday asserted that legitimate tax demand cannot be considered "tax terrorism" because India is not a tax haven.
Appearing to defend the tax notices sent to about 100 FIIs totalling USD 5-6 billion, he said "taxes which are payable must be paid".
"India is not so vulnerable that every legitimate tax demand is considered as tax terrorism ... We are not a tax haven and we don't intend to be one," he said while addressing CII's annual general meeting.
In the biggest-ever tax demand, nearly 100 foreign funds have been asked to cough up an estimated USD 5-6 billion for 'untaxed gains' made by them in the Indian markets over the past years. The Income Tax department has imposed 20 percent Minimum Alternate Tax (MAT) on capital gains made by FIIs.
Jaitley in his last budget speech proposed to scrap MAT on capital gains made by FIIs.
"Taxes which are not payable must not be paid. They should be challenged...But taxes which are payable must be paid," he said, adding "Our fairness has been partly misunderstood. The converse of tax terrorism is not a tax haven."
Stating that some decisions of the past have made the taxation regime adversarial, he said, "an emerging economy that expects investment cannot indulge in what has been referred to as tax terrorism or very aggressive tax laws".
"But our fairness has been fairly misunderstood. The converse of tax terrorism is not a tax haven. If I read the front page of some newspapers, it is the impression that I get," he said referring to tax demand notices on FIIs.
Commenting on the tax notices, Revenue Secretary Shaktikanta Das said, "I think what FIIs and FPIs are asking is retrospective exemption and not retrospective application of a tax law. Because MAT was leviable on them, therefore these assessment, these demand have been raised."
He said that some Foreign Portfolio Investors (FPIs) and Foreign Institutional Investors (FIIs) had gone to the Authority of Advance Ruling (AAR) which ruled that MAT was applicable.
"Naturally the Income Tax Assessing Officers have raised the demand," he said.
Jaitley said the government is in the process of simplifying the procedures in direct and indirect taxes to rationalise the rates and effectively bring them down.
As regards the new law on black money, he promised a "reasonable compliance window" for persons with overseas funds to come clean and sought suggestions for improving its structure in the proposed Undisclosed Foreign Income and Assets (Imposition of Tax) Bill 2015.
"...A very reasonable compliance window would come for those who indulged in misadventure in the past," Jaitley said.
The government had introduced the stringent Bill in the Lok Sabha to deal with the menace of black money stashed abroad. Besides other things, the law provides for imprisonment of up to 10 years for hiding foreign assets.
It will also provide a short-term compliance window for people having undisclosed income abroad to come clean.
The legislative roadmap ahead of the government, he said, includes the passage of the GST Constitutional Amendment Bill, the amendments to Companies Act, and the amendments to the Land Acquisition Act.
As regards GST, he said that there is a broad consensus on the issue and the GST Constitutional Amendment Bill would be taken up for consideration and passage in the Lok Sabha over the next leg of the Budget session, beginning April 20.
"Once it (the Bill) is approved, the next stage would be to get the approvals of various states... This itself will become one of the important taxation reforms in India in the recent history," the Minister said.
On the Land Acquisition Bill, he said it would be a big challenge passing the amendments to the land law. "I firmly believe that the 2013 land law is hugely detrimental to rural India and I am particularly re-emphasising the point," the Finance Minister said.
Although the amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 was approved by the Lok Sabha, the bill has stuck in the Rajya Sabha as the ruling party does not have a majority in the Upper House.
