Published Editorial

Budget 2014: Changes FIIs hope FM brings to end 'tax terrorism'

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ET Online

By

Tejas Desai

Tax Partner, EY

Contributed by:

Jesal G Mody

Senior Tax Professional, EY

It seems no Budget in India's recent history has been preceded with the kind of anticipation and expectation as Finance Minister Arun Jaitley's maiden budget is coming as it does following a historic electoral win for the Bhartiya Janata Party (BJP), which has promised strong and effective governance to the people of India.

The BJP's election manifesto promised to end 'tax terrorism' if voted to power and that single phrase has itself put tax policy in spotlight as taxpayers now look forward to acchhe din (better times). In my view, if the FM via his budget is able to send out a clear message of certainty, predictability and reasonableness in enactment of tax laws and its application by the tax administration, without necessarily reducing/foregoing taxes, he would have taken a significant step towards fulfilling his Government's promise of ushering in acchhe din.

The list of expectations on the taxation front is certainly very long.

Here, we take a look at the critical areas of tax that impact capital markets and a suggestion of what investors (particularly FIIs) are hoping to see:

The suggestions/expectations if implemented should remove the anomalies and irritants faced by investors when considering India as an investment destination and send out a positive message to the international investing community that India is serious about its tax reforms. Together with the aforesaid legal changes, there is a strong need to usher in administrative reforms in the tax department. The problems as well as the solutions have been well articulated in the recent report of the Tax Administrative Reforms Commission headed by Dr. Shome. Taking a step towards administrative reforms plus strengthening dispute resolution mechanisms (whether it is the AAR, APA, MAP, DRPs etc) will help remove the negative perception of India as a highly complex and aggressive tax jurisdiction to do business in.