Talking tough, Finance Minister Arun Jaitley said that a legitimate tax demand is not tax terrorism. “We are not a tax haven and we don’t intend to be one,” Jaitley said while addressing the Confederation of Indian Industry’s (CII) national conference here on Monday.
His remark comes at a time when tax authorities have issued notices to about 100 foreign portfolio investors (FPIs) demanding around ₹60,000 crore as Minimum Alternate Tax (MAT) for ‘untaxed gains’ made by them in Indian markets over the past years.
The Income Tax department has imposed 20 per cent MAT on capital gains made by FPIs. “Taxes that are not payable must not be paid — they should be challenged. But, taxes that are payable must be paid,” he said, referring to foreign funds’ allegations of high handedness by tax authorities.
“If people are aggrieved, they have the right to challenge it, but having lost in the court you can’t refer to the process as tax terrorism. Relief may probably lie in the judicial process or with the legislature for the future, but certainly not with newspapers,” he said referring to various news reports on notices issued to FPI.
Acknowledging that some decisions of the past have made the taxation regime adversarial, he said that an emerging economy that expects investments cannot indulge in what has been referred to as tax terrorism or very aggressive tax law.
“But our fairness has been 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.
Jaitley, in his last Budget speech, proposed to scrap MAT on capital gains made by FPIs from this fiscal year.
Retrospective exemption Revenue Secretary Shaktikanta Das said foreign funds are asking for retrospective exemption and not retrospective application of a tax law.
“The legal position is very clear. The law will naturally apply for the prior period. The amendment, which has been proposed, will take prospective effect on or after April 1, 2015. So, prospectively, there will be no MAT on the FIIs or FPIs,” he said.