A global tax group on Wednesday added its voice to protests against an Indian plan to retroactively tax business deals, saying it could deter foreign investment in Asia's third-largest economy. The Indian government's move is seen as targeting British mobile giant Vodafone which won a Supreme Court battle against a bid to tax the company over its takeover of Hong Kong-based Hutchison Whampoa's Indian unit.
"The uncertainty resulting from the retrospective aspects of the finance bill could adversely affect the willingness of businesses to commence or continue operations in India," said the US-based Tax Executives Institute (TEI). New Delhi's planned change to the Income Tax Act announced in last month's budget would be retroactive to 1962 and would oblige domestic and foreign firms alike to pay tax on any transaction involving an Indian asset.
For a tax system to be fair, "taxpayers must be able to rely on the law in effect when business transactions take place," said TEI, which represents 3,000 of the biggest companies in Asia, Europe and North America. "Tax legislation should be prospective" rather than retroactive, said the group in a letter to Indian Prime Minister Manmohan Singh. The missive to Singh came after seven global industry bodies from the United States to Japan warned earlier this month the tax threat was "prompting a widespread reconsideration of the costs and benefits of investing in India."
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