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Created on Wednesday, 01 April 2015 03:47
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(Image Courtesy: World Bank)
The new Indian Government’s Jekyll and Hyde approach towards retrospective taxation unleashed by its predecessor might prove costly in the case of Cairn Energy Plc.
The Government, led by National Democratic Alliance (NDA), has dubbed Cairn case as a legacy issue of United Progressive Alliance (UPA) regime. It wants such cases to run through the legal process. At the same time, it has reiterated its commitment to not resort to retro-taxation except in rare situations. It has repeatedly vowed to end tax terrorism.
The new Government has, however, refrained from repealing retro-tax law, which it can do easily with absolute majority in Lower House as pointed by ex-Finance Minister P. Chidambaram. The existence of retro-tax provision in the Statue would thus always remain a business risk factor for the corporate sector.
The NDA Government is thus speaking in two voices that smacks of Jekyll and Hyde syndrome or split governance to be precise.
Cairn Energy has, however, subtly referred to NDA’s credibility deficit on retro-taxation. To a recent query from an analyst as to “how does this (tax notice) square with the Indian Finance Minister's comment that he is never going to use a retrospective capital gains tax again.”
Cairn Energy Chief Executive Simon Thomson quipped: “It doesn't square.”
Read more: Cairn case Might prod India to Revisit its dual Stance on Retro tax
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Created on Saturday, 10 January 2015 19:16
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Edited Image courtesy: incometaxindia.gov.in
Both the corporate lobbyists and reformists across the world are always willing to lock horns over the depreciation of assets under the income tax law.
This is because depreciation has gradually emerged as multi-facet window for tax incentives, overshadowing its primary function as a method for phased deduction of the cost of assets from annual pre-tax income over a period. The stakes are thus high both for the companies and the income tax department (ITD) in any country.
This aspect came to the fore in 2014 that witnessed intense debate in the United States over the bonus depreciation. It allows businesses to make 50 deduction of investment on purchase of specified assets in the first year of purchase from their pre-tax income. This provision was revived in 2008 for limited period to reverse economic downturn.
Certain entities fiercely opposed its extension and others pitched not only for its retrospective extension but also for regularisation as a permanent feature of the Internal Revenue Code (IRC) of 1986.
The Christmas-eve saw President Obama extending the bonus depreciation by one year, which resembles a compromise of sorts between two conflicting opinions. He did this by signing the Tax Increase Prevention Act 2014 on 19th December.
Bonus depreciation is an attractive sop for companies if one goes by a case study done by Genpact, a global leader in Business Process and Technology Management.
Read more: A tale of Depreciation Reforms in the World’s two Largest Democracies
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Created on Thursday, 13 November 2014 19:44
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(Image Courtesy:FATF)
BJP’s resolve to bring back black money lying in secret overseas accounts is like missing the woods for the tree. Tonnes of black money regularly flow back into the country through different channels. Successive Governments have been lax towards such capital flows.
Such investments include round-tripping and foreign institutional investment (FII) especially the one coming through participatory notes and other similar instruments collectively referred to as offshore derivative instruments (ODIs).
The round-tripping has been camouflaged through tax treaty shopping, towards which Foreign Investment Promotion Board (FIPB) has been benign. This is notwithstanding the relentless opposition from Department of Revenue (DOR) for several years.
It remains to be seen whether the NDA Government or the Supreme Court would empower Special Investigating Team (SIT) to also probe such investments to find out whether it is same or similar black money that they are targeting.
The need for such a probe would become clear by taking up two latest instances relating to FIPB cases. These instances also reflect on the NDA Government’s lack of policy initiative in this area.
One case relates to rejection of an application for ex-post facto approval of Rs 50-crore investment which income tax department (ITD) considers as unaccounted money. The investment was made by two British Virigin Island (BVI)-based investors in the BSE-listed Veritas (India) Private Limited (VIPL).
The second case relates to FIPB’s ex-post facto approval of FDI aggregating to Rs. 350 crore in Soma Tollways Private Limited (STPL). This includes investment through two Swiss numbered accounts, Geneva 4813 and Geneva 7631 accounts, whose ownership continues to remain a top secret.
Read more: Let SIT probe round tripping & treaty shopping to get a big snap on black money
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Created on Tuesday, 04 November 2014 15:37
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(Image courtesy: incometaxindia.gov.in)
“The Indian government’s white paper is so white, so white, that you can’t read anything on it. So it’s useless....”
Mr. Narendra Modi stated this on 31st August 2012 when he was Chief Minister of Gujarat. He poked fun at UPA as well as sounded serious at #ModiHangout while giving three-sentence reply to a question on black money stashed abroad.
Time is ripe to spin this banter on NDA Government. Its efforts to bring back black money to the country have been so white to the point of being totally inconsequential. And the Modi Government is not hiding this truth.
Click the ‘tackling black money’ button on the home page of Department of Revenue (http://dor.gov.in/tacklebm), the viewer would find that the page was last updated on 24th April 2014 during the UPA regime!
The page captioned ‘Efforts of Government in Tackling Black Money’ displays four documents. These are: Baseline Report which was updated on 24th April 2014; White Paper on Black money issued on 21st May 2012, Government’s response to Swami Ramdev's letter to the then Prime Minister Dr. Manmohan Singh and Report of the Committee on ‘Measures to Tackle Black Money in India and Abroad’ that submitted its report in August 2012 under the leadership of Chairperson, Central Board of Direct Taxes (CBDT report).
There is nothing in the public domain that can shed light on what new action the Modi Government has taken on valuable suggestions contained in the white paper and the CBDT report.
Read more: Modi Sarkar’s fight against black money is so white, so useless!
