Pranab seeks to allay concerns over Direct Taxes Code
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Last Updated: Saturday, September 19, 2009, 22:04
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 said.

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", Mukherjee said.

"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," he said.

"The code will help expand to build up and be competitive in the world. It is futuristic and bold new tax regime", he said.

Those present at the interactive session included Biocon CMD Kiran Mazumdar Shaw and Mohandas Pai, Member of the Board, Infosys.

Bureau Report

First Published: Saturday, September 19, 2009, 22:04

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