Ahead of the Finance Minister, Mr Pranab Mukherjee's meeting with the US Treasury Secretary, Mr Timothy F. Geithner, 12 US industry bodies have written to Mr Geithner opposing the recently proposed tax amendments in the Indian Finance Bill 2012.
They have urged Mr Geithner to raise these concerns and seek clarity on the scope and international consistency of the proposals with Mr Mukherjee.
These bodies – with representation from a host of sectors including financial services and IT – have said that the proposed amendments will have a significant negative effect on their member companies, customers and shareholders, and investors in India and may have a detrimental impact on the flow of direct investment into India.
The 12 bodies include Financial Executives International, Financial Services Forum, Information Technology Industry Council, Investment Company Institute, Managed Funds Association, National Foreign Trade Council, Securities Industry and Financial Markets Association, Software Finance & Tax Executives Council, TechAmerica, US Chamber of Commerce, United States Council for International Business, and the US-India Business Council.
They added, “The proposals, which include an unprecedented period of retroactive tax collection, a broad and unclear general anti-abuse rule (GAAR) and an onerous tax on indirect stock transfer, are inconsistent with international tax policy and standards and result in significant erosion of the rule of law.”
They asked Mr Geithner to raise these concerns with his Indian counterparts during the upcoming IMF and World Bank meetings this week.
The industry bodies said a predictable, transparent and internationally consistent tax regime is imperative for companies operating in India, and is a critical component of attracting long-term investment.
“We believe that the implementation of these provisions will have immediate and severe consequences for companies, affecting the willingness of companies to commence or continue their operations in India.”