Govt seeking to amend controversial tax rules next month

NEW DELHI Tue Jan 8, 2013 9:19am IST

Rupee notes of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012. REUTERS/Vivek Prakash/Files

Rupee notes of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012.

Credit: Reuters/Vivek Prakash/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - The government is likely to approach parliament next month to water down retrospective tax rules that damaged investor confidence, two finance ministry officials said on Monday, a move that may help settle British-based Vodafone Group Plc's long-runnning $2 billion tax dispute.

Vodafone, the largest overseas corporate investor in India, has repeatedly clashed with Indian authorities over taxes since it bought Hutchison Whampoa's local mobile business in 2007.

The government was heavily criticised by the corporate sector for introducing the tough tax rules last year at a time India was suffering a sharp economic slowdown and trying to encourage investment.

Finance Minister P. Chidambaram has for several months been considering recommendations by a government panel that said past mergers and acquisitions should not be taxed.

Vodafone, the world's biggest mobile operator by revenue, said in a statement last week that it had received a reminder from Indian tax authorities on the disputed tax dues, adding it believed that no tax was payable on the deal.

"(The) Finance Minister is likely to approach the parliament next month on the retrospective issue," said a senior finance ministry official, who asked not to be identified because of the sensitivity of the issue.

He declined to say whether the government was considering a waiver of the entire tax bill or cancelling interest and penalty charges on the original tax demand.

However, the officials said Chidambaram was likely to introduce amendments in the 2013 Finance Bill to revise the amendments that were introduced last year along with the budget.

Then Finance Minister Pranab Mukherjee introduced an amendment enabling authorities to make retrospective tax claims on long-concluded corporate deals after the Supreme Court had quashed the government's tax demand on Vodafone.

A committee headed by the finance minister's economic adviser, Parthasarathi Shome, has recommended that past mergers and acquisitions should not be taxed, or the government should waive both interest and penalty.

The officials said Chidambaram was looking at the recommendations to work out a solution to the Vodafone dispute by considering its impact on revenue receipts as well as investor sentiment.

They said the government needed parliament's nod to provide tax relief to the company, as this would also affect tax demands amounting to at least $5.5 billion for other such deals.

On Saturday, the Economic Times reported that tax authorities had asked Vodafone to pay 140 billion rupees, including interest on the tax dues.

One official said the letter was just a reminder to Vodafone to pay the tax following last year's amendment in the Act. "It is not a fresh tax notice," the official said, adding the parliament could provide relief.

The official said Vodafone had also expressed willingness to hold talks, and a solution could soon be reached.

Last April, Vodafone threatened the Indian government with arbitration proceedings in its fight over the retrospective tax proposal.

($1=55.01 rupees)

(Additional reporting by Devidutta Tripathy; Editing by Tony Munroe, Frank Jack Daniel and Ron Popeski)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Republic Day

Reuters Showcase

RK Laxman Dead

RK Laxman Dead

'Common Man' cartoonist RK Laxman dead at 93  Full Article 

Banking Revolution

Banking Revolution

India turns to corner shops, mobile phones for banking revolution.  Full Article 

Nuclear Group

Nuclear Group

China urges India to take steps to satisfy standards of NSG  Full Article 

Gold Market

Gold Market

Chinese gold demand holds up ahead of holiday, Indian buying weak  Full Article 

India-U.S. Relations

India-U.S. Relations

Column - U.S. and India should join to balance China's rise  Full Article 

Padma Bhushan

Padma Bhushan

India honours Bill Gates with civilian award  Full Article 

Fashionable Modi

Fashionable Modi

When Modi met Obama, his name was all over - his suit  Full Article 

Nuclear Deal

Nuclear Deal

Obama reveals nuclear breakthrough on landmark India trip  Full Article 

Australian Open

Australian Open

Venus fireworks illuminate Australia Day  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage