Asking India to take bold initiatives, the UKIBC said the government should repeal the legislation on retrospective taxation and drop outstanding high profile cases that are impacting the country’s image as an investment destination.
UK India Business Council (UKIBC) CEO Richard Heald said the residual issues of retrospective tax still impact external perceptions of India as an investment environment.
“These high-profile cases, started by the previous government, are ongoing to the detriment of India’s image among global investors, the companies involved, and their clients/customers, staff, and wider local communities,” Heald said in an emailed interview.
He said this while replying to a question on the long-pending tax dispute of two UK companies – Vodafone and Cairn Energy.
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“We believe that the most positive step the government of India could take would be to repeal the 2012 legislation on retrospective taxation, drop the outstanding cases, and adopt international norms,” he added.
The UK oil explorer Cairn Energy is facing a tax demand of Rs 10,247 crore on a 2006 business reorganisation it carried out in its India unit before getting it listed.
British telecom giant Vodafone is also facing tax liability over its USD 11-billion acquisition of 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007.
When asked about the possibilities of collaboration in defence and civil aviation sectors as India has relaxed FDI norms in these areas, he said immense scope is there for research and development partnerships in the defence and aerospace sectors.
“Raising the FDI caps has certainly helped. There are, though, two other important measures that India could take to unlock the full potential of UK-India collaboration in defence and civil aviation,” he said.
Heald suggested for introduction of flexibility into the defence offset rules and to provide clarity on the medium term expenditure/procurement plans.
“If defence businesses know how much the government plan to spend on, say, fighter jets or submarines in 5 to 10 years’ time, then they can invest in building partnerships and capacity in advance of those opportunities,” he added.
The UK is the largest G20 investor in India. British firms have re-invested USD 7.9 billion between April 2000 and September 2016 here.