| MUMBAI, March 28
MUMBAI, March 28 (Reuters Breakingviews) - Investors fear
that New Delhi will use tax law changes that could trap Vodafone
to snare offshore institutions. If that's not what the
government intends, it should say so. If it is, the value of
nearly all investment assets is endangered. Capital inflows
could slow to a trickle.
Full view will be published shortly.
- Foreign brokerages are worried about recent provisions,
designed to tax indirect investments and combat tax evasion in
India. They say the provisions are couched in ambiguous language
and could also be used to target overseas market investors.
That, in turn, could risk a sell-off in markets, Reuters
reported on March 28.
- The Asia Securities Industry and Financial Markets
Association, a lobby group, published a letter to Finance
Minister Pranab Mukherjee on March 28, expressing "deep
concern," and asking for the government to clarify its stance.
- At the heart of its concerns are two provisions announced
this month. The first gives India power to retroactively tax the
indirect transfer of assets, which was widely seen as targeting
Vodafone's $11 billion purchase of Hutchison Whampoa's Indian
assets. The second targets tax evaders via the General
Anti-Avoidance Rule (GAAR), putting the onus on investors
registered in countries with special tax exemptions with India
to prove they do not intend to explicitly avoid taxes.
- Mumbai's benchmark Sensex index has lost more than 1
percent this week to stand at its lowest in two months, with
traders citing the uncertainty behind these provisions as a main
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
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(Editing by Robert Cole and David Evans)