‘Legitimate tax demand is not tax terrorism’

New Delhi: Finance Minister Arun Jaitley on Monday asserted that legitimate tax demand cannot be considered “tax terrorism” because India is not a tax haven.

Appearing to defend the tax notices sent to about 100 FIIs totalling $5-6 billion, he said “taxes which are payable must be paid”.

“India is not so vulnerable that every legitimate tax demand is considered as tax terrorism … we are not a tax haven and we don’t intend to be one,” he said while addressing CII’s annual general meeting.

In the biggest-ever tax demand, nearly 100 foreign funds have been asked to cough up an estimated $5-6 billion for ‘untaxed gains’ made by them in the Indian markets over the past years. The Income Tax department has imposed 20% Minimum Alternate Tax (MAT) on capital gains made by FIIs.

Jaitley in his last budget speech proposed to scrap MAT on capital gains made by FIIs.

“Taxes which are not payable must not be paid. They should be challenged…but taxes which are payable must be paid,” he said adding, “Our fairness has been partly misunderstood. The converse of tax terrorism is not a tax haven.”

Stating that some decisions of the past have made the taxation regime adversarial, he said, “An emerging economy that expects investment cannot indulge in what has been referred to as tax terrorism or very aggressive tax laws”.

“But our fairness has been fairly 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 referring to tax demand notices on FIIs.

Commenting on the tax notices, Revenue Secretary Shaktikanta Das said, “I think what FIIs and FPIs are asking is retrospective exemption and not retrospective application of a tax law. Because MAT was leviable on them, therefore these assessments, these demands have been raised.”

He said some Foreign Portfolio Investors (FPIs) and Foreign Institutional Investors (FIIs) had gone to the Authority of Advance Ruling (AAR) which ruled that MAT was applicable. “Naturally the Income Tax Assessing Officers have raised the demand,” he said.


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