Bangalore: Addressing concerns over the proposed features in the Direct Taxes Code, Finance Minister Pranab Mukherjee on Saturday said changes in MAT is necessary considering big revenue loss due to lowering of both personal and corporate income tax rates in the Code.
"It must be remembered that the new tax code grandfathers
the plethora of exemptions available under the old law ...The
revenue loss due to them will continue to be incurred for a decade or so. At least for this period, an additional revenue measure such as MAT is necessary for the government to meet its expenditure obligations," he said.
The MAT at present is linked to the book profits whereas the Code proposes that MAT be levied on assets of companies. The Minimum Alternate Tax is levied on companies which do not come under tax net due to various exemption granted to them.
The Finance Minister was speaking at an interactive
session with industry captains to seek feedback on the
proposed Direct Taxes Code.
In the context of relief from double taxation, he said
lots of apprehensions have been expressed over provisions in
the code. Clarifying that between the Direct Taxes Code and
the double taxation treaty, "the one that is later in point
shall prevail", he said.
He further said "any further increase in the fiscal
deficit can lead to implicit taxation of profits through
increase in interest rate".
"In case any international agreement/treaty leads to
unintended consequences like tax evasion or flow of benefits
to unintended persons, it is open to the signatory to take
corrective steps to prevent abuse of the treaty," Mukherjee
Earlier, the Finance Minister had announced that India
would be revisiting the double tax treaties with some nations
like Mauritius and Switzerland.
He pointed out that India has an unblemished track
record of fulfilling her international obligations and said
there was no reason for any international investor to be
apprehensive on this count.
Addressing fears of flight of capital and fluctuations in
investment climate, he said, "India is a land of emerging
opportunities and its magnetism is and will remain
irresistible for people and capital alike".
On fears of fluctuation in investment climate, based on
frequent changes in domestic laws and need for re-negotiating
treaties, he said, "Appropriate steps will be taken to assure
the treaty partners that mutual beneficial provisions of
existing treaties will remain valid even after implementation
of the new tax code".
"Any effort to evaluate the proposed Direct Tax Code from
a viewpoint of increase or decrease in next year`s tax
liability is not only myopic it is also unjust and unfair",
"The code must be viewed in totality of its impact over
the next few decades, not only in terms of opportunities
particularly economic opportunities for children and
grandchildren, but also transparency and convenience and
compliance, accrual of revenue with government, health of the
economy and strength of the nation", he said.
"Obviously in the revenue equation between the
old tax regime and proposed tax regime being zero-sum, in the
immediate aftermath everything cannot be positive. Yet, the
proposed legislation intends to be beneficial for everyone in
the medium and long term".
Of the 945 opinions polled on the website till September 16,
"80 percent have rated the code as excellent, very good or
satisfactory. I am inspired by such overwhelming positivism,"
"The code will help expand to build up and be competitive
in the world. It is futuristic and bold new tax regime", he
Those present at the interactive session included Biocon
CMD Kiran Mazumdar Shaw and Mohandas Pai, Member of the Board,