Finance Minister Arun Jaitley today said that an unsustainable tax demand would only earn the country a bad name as an investment destination, comments that come in the wake of tax department losing its battle against Shell in Mumbai High Court.
“Unsustainable demand won’t get you taxes. Unsustainable demands in the books can show you in good glory, but eventually those taxes will be blocked in some judicial court proceedings…they would have only earned us a bad name as an investment destination,” he said at the HT Leadership Summit.
He, however, maintained that those who are supposed to pay taxes must pay.
Jaitley’s comments come in the wake of Mumbai High Court order earlier this week wherein Income-Tax Department lost its Rs 18,000-crore transfer pricing cases against oil major Shell India.
Already the government is engaged in a Rs 20,000 crore tax dispute with British telecom major Vodafone.
Referring to retrospective amendments to the tax laws by the UPA government, Jaitley said, if it is not investor friendly, people would start looking elsewhere.
He further said making taxation regime investor friendly and streamlining the procedure for land acquisition are the big challenges facing the government.
“Undoing a lot of taxation decisions is quite challenging, but that necessarily does not involve a legislative action. Only some areas require action,” he told the gathering.
Jaitley, however, took comfort from the fact that taxation laws are the domain of the Lok Sabha in which the NDA has majority.
The Minister said though it managed to get the mess concerning allocation of coal blocks cleared with ease, resolving other issues remain a challenge.
When asked the three specific reforms he would like to get passed in the ensuing Winter session of Parliament, Jaitley said he would like insurance, coal laws and Goods and Services tax (GST) to be cleared.
He said there are political risks to reforms and those in government would have to adequately blend the economic reforms with politics.
“Economic reforms have also to be blended with competent and clever politics. Reforms alone by themselves are not enough, if they have to survive politically, the blending has to be adequately done by those involved. And I am sure it is one area both my party and government is paying adequate attention,” Jaitley said.
On black money in the country, he said, real estate, jewellery market, luxury market and mining are the sectors in which they are prevalent. The Minister said he has asked the chief commissioners of direct taxes to look into these sectors.
As regards black money stashed abroad, he said his government would follow legally the right course.
“If you make an adventurist step and make every name available, without any supporting evidence, breach your international treaties, you are not going to be only disadvantaged by future non-cooperation, but also nobody will want to provide you with supporting evidence,” he said.
On privatisation, he said, principally he has always been for privatisation in sectors where government can get out. “Not only the mindset of polity has to change but also all other agencies will have to change,” he said, adding that the civil servants cannot work in an oppressive environment.
“While our accountability norms has to be very tight, but government taking commercial decision can never do it in an oppressive environment. As part of our reform process, we will also have areas which at some stage require to be considered by the larger political system,” he said.
Jaitley also said government would be able to meet the direct tax target, though indirect tax remains a “challenge” as manufacturing sector was a great source of worry.
The Finance Minister also expressed concern over banks become defensive in lending in the wake of high stressed assets.
He said the NPAs had come down to 2 per cent of total advances after implementation of SARFAESI Act, but have now again risen to 5 per cent.
“This has put banks on backfoot and made them defensive,” he said, adding slowdown in credit offtake was a cause of concern. Bankers, he said, have been asked to push up lending.
Referring to the land acquisition bill, Jaitley said, the NDA government did not have any problem in farmers getting higher compensation but the real issue was procedure.
“I have really no quarrel with the compensation part. Farmers in India are entitled for higher compensation, but the procedural part of the land law is a big problem and it will require a lot of efforts to simplify those procedures”, he said.
When asked if he expect RBI to cut interest rate in its December 2 monetary policy, Jaitley said: “I have lot of patience.”
On relationship between the Finance Ministry and Reserve Bank, he said “I don’t think there is any requirement for a knee-jerk reaction. I consider it (discussions) only a part of a healthy debate”.
On Supreme Court’s observations on CBI Director Ranjit Sinha, Jaitley said governments should be extremely careful while making appointments to such high posts.
“I have been looking at the law that applies, whether it’s a gap in the law or otherwise. One has to seriously examine who has the power to do that. Because now the new appointing authority is a collegium, I think governments have to be extremely careful when they make appointments for this purpose,” he said.
In a humiliation just days before retirement, CBI Director Sinha was yesterday removed by the Supreme Court from the 2G scam cases, saying the allegations against him of protecting some accused appears to be “prima facie credible”.
Recalling the events leading to appointment of Sinha in 2012, Jaitley said the CBI Director was appointed by the previous UPA government just a day before a Parliament select committee report on Lok Pal Bill that provided for the procedure of such appointment was to be tabled in Rajya Sabha.
“At 11 am that report was to be tabled and this appointment was made the previous evening at 9 pm. The next day Sushma Sushma Swaraj and I wrote to the Prime Minister (Manmohan Singh) that on what criteria have you done this…” he said.