Arun Jaitley contradicts BJP MP, says will bring blackmoney to India; offers sops to taxpayers, MFs

Written by Agencies | New Delhi | Updated: Jul 25 2014, 23:26pm hrs
Blackmoney Arun jaitleyIndia will not have to wait for long for bringing back blackmoney: Arun Jaitley (PTI)
A day after a BJP MP Nishikant Dubey said the PM Narendra Modi govt will not be able to bring back blackmoney from Switzerland back to India 'in our lifetime, FM Arun Jaitley moved to scotch the setback in Parliament.

Jaitley also announced some concessions for mutual fund industry and income tax payers, while committing to low tax regime to promote industrial activity to generate jobs and create more resources to undertake social welfare activities.

Announcing the concessions in the Lok Sabha, Arun Jaitley said high tax rate of 20 per cent on the debt mutual fund will apply from July 10, the date of the presentation of the budget, and not from April 1, 2014 as proposed earlier.

In this regard, the Minister said he was accepting a suggestion made by Congress leader Jyotiraditya Scindia and some other members as it amounted to leving tax with retrospective effect for about three months.

The Lok Sabha later passed the Finance Bill, 2014 completing the budgetary exercise in the Lower House.

In order to provide some relief to the tax payers filing returns late and paying penalty on daily basis, the Minister said that CBDT will be empowered to exercise discretion in this regard. He also expanded the scope of Settlement Commission to include cases where proceedings have already been initiated.

The Minister rebuffed his own party MP Nishikant Dubey for saying that "we will not be able to bring back black money from Switzerland in our lifetime."

Jaitley said "we pray for his long life but we will not have to wait for long (to get back black money from abroad)."

Justifying his emphasis on having low tax regime and smooth tax system, the Minister said the government wants to revive the investor sentiment "which has been disturbed" and mop up additional resources to fund social welfare activities.

He said low tax regime will make India goods competitive and cited China as an example in this regard.

Highlights of Arun Jaitley's speech:

* Country will not have to wait for long for bringing back blackmoney

* We need to fight economic slowdown; inflation cannot be tackled by just hiking interest rate

* We are giving all information received from abroad on black money to Supreme Court

* We want to revive investor sentiment which had been disturbed

* Higher tax on debt mutual funds to apply prospectively from July 10

The changes proposed in the Finance Bill, Jaitley said, "will further simplify and smoothen the tax strucutre of the country and help us in raising the revenue because this year we need a higher revenue itself because of meeting the fiscal deficit targets."

On his proposal for relaxing norms for late filing of returns, Jaitley said "for late filing of returns there is a provision which has become onerous as huge penalty (is levied) per day and there are no power of waiver itself.

"So if somebody says it's filed after a year than per day the penalty used to become extremely exorbitant. So some discretion is given to the CBDT with regard to that penalty where cases of late filing of returns were involved. The penalty as such will remain."

As regards the proposal on the Settlement Commission, Jaitley said it will take up "cases where proceedings have been inititated for reassessment and proceedings which are pending for fresh assessment in pursuance of an order of a tribunal or a commissioner for setting aside or cancelling the assessment itself."

In order to reduce mounting tax litigation, Jaitley said he proposed to provide for more benches of Advance Ruling to deal with transfer pricing disputes.

Seeking to boost the wind energy sector, he announced extension of the accelerated depreciation benefit to the sector as demanded by members.

Talking about the concerns expressed by members over tax forgone, Jaitley said it is permitted by law and eventually it benefits consumers and make domestic products price competitive.

"Ours is not high tax government...Consumers want to buy goods not taxes... if you load every product with high taxes, your products will become less competitive," he said, adding that China has learnt the art of low cost productivity.

Jaitley said he had extended the concessional duty rate on automobiles and capital goods till December 31 to give boost to the manufacturing sector. The previous UPA government had given the concession up to June 30.

"We are interested in creating a situation that the sentiment that had been disturbed.... to revive that sentiment back. There is no contradiction in being pro business and pro poor at the same time. When economy does well we can take care of lower strata of population which is 30 per cent," he said.

Rejecting the opposition charge that the government was giving tax relief to benefit corporates, Jaitley said it was a "misnomer" as tax concessions lead to reduction of prices and finally the consumer get the rebate.

Referring to the controversial General Anti-Avoidance Rules (GAAR), the Minister said he will take a final call on it later.

The implementation of GAAR, brought in by the then Finance Minister Pranab Mukherjee to check tax avoidance, was deferred by two years following widespread concerns by domestic as well as foreign investors.

Talking about the efforts to revive investor sentiment which had been "damaged" by retrospective amendment to the Income Tax, the Minister said, the government in principle will not bring any such legislation which will create fresh liability.

As regards the earlier cases, Jaitley said, the judicial process would continue.

On the eve of Kargil Vijay Diwas, Jaitley said he had provided an additional Rs 5,000 crore over and above what was allocated in the interim budget of the UPA government.

The government is working on formula to implement one-rank-one-pension for defence forces, he said, adding the proposals are afoot to set up a war museum and war memorial in honour of 21,000 soldiers who sacrificed their lives for the country after 1947.

India's new govt promises low and stable tax regime for economic revival

(Reuters) India's new government pledged on Friday to pursue a low, stable and simple tax regime as it looks to win back investor confidence and spur economic activity, both of which have nosedived due to mounting tax disputes.

A struggle to raise revenues in a sluggish economy and the pressure to narrow the fiscal deficit to avoid a "junk" sovereign credit rating had forced the previous administration to aggressively collect taxes from companies.

Although the drive produced only insignificant increases in tax receipts, it swelled the total amount of taxes tied up in disputes and litigation to 4 trillion rupees ($66.6 billion) and dented corporate sentiment.

Finance Minister Arun Jaitley said the government would shun that approach and instead focus on smoother and investor-friendly tax policy to boost industrial activity and generate higher revenues.

"We are interested in creating a situation where...we revive that sentiment back," he told parliament. "My approach has been that we try and resolve disputes. We try and end arbitrariness. We try and give as much relief to the vulnerable as possible."

But it remains to be seen how Jaitley will proceed as two successive years of sub-5 percent growth have hit tax revenues, making it tougher to deliver on his promise to cut the fiscal gap to a seven-year low of 4.1 percent of GDP this year.

Customs and factory gate duty receipts recorded an annual fall in the first quarter of the current fiscal year, increasing the government's reliance on non-tax receipts.

Jaitley, separately, told lawmakers that the government would sell stakes during this fiscal year in Steel Authority of India Rashtriya Ispat Nigam Ltd and Hindustan Aeronautics to bolster revenues.

RETROSPECTIVE TAX LAW

High-profile tax enforcement actions against global companies, including Royal Dutch Shell Plc, Vodafone Group Plc and Nokia Oyj have contributed to an image of India as a country that pursues "tax terrorism".

Prime Minister Narendra Modi has vowed to shed that tag by resolving pending disputes and reforming the tax administration as part of his plan to pull Asia's third-largest economy out of the longest spell of sub-par growth in a quarter-century.

While Jaitley's maiden budget this month contained several measures that sought to minimise tax litigation, it did not scrap the retrospective amendment of laws on indirect transfers.

Corporates have long pleaded with the government to annul the amendment, introduced in 2012 to reopen a tax dispute worth more than $2 billion with Vodafone after the Supreme Court had ruled in favor of the British mobile operator.

Analysts see that move as an unwelcome defining moment in India's relationship with multinationals, which slowed foreign investments.

Jaitley assured investors the government would not use that amendment to create new liabilities, but added pending disputes arising out of the legislation would be settled by courts.

"I have allowed the judicial process to sort out the past and for the future we won't allow this problem to take place in India," he said.

Jaitley also promised to clear the air on implementation of the controversial rules on tax avoidance introduced by the previous government, which were deferred by two years. He did not give a timeline for the decision.

Introduced in 2012, the General Anti-Avoidance Rules (GAAR), were aimed at companies routing money through tax havens such as Mauritius, but implementation was delayed after an uproar from investors who feared harassment from tax authorities.

The former lawyer defended his decision to extend excise duty cuts for cars and other consumer goods until the end of this year and give tax breaks for individual taxpayers, saying the move would perk up demand and help an economic rebound.

"Put more money in the hands of average citizens so that his spending also increases and this larger economic activity will then lead to an enhancement of the growth rate itself," he said.

Two years of near double-digit inflation, combined with faltering growth and stagnating wages have crimped India's domestic-demand driven growth story.

($=60.09 Indian rupees)