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US business groups to protest tax law changes in India

United States America,Business/Economy, Thu, 19 Apr 2012 IANS

Washington, April 19 (IANS) A dozen US business groups have asked US Treasury Secretary Timothy Geithner to raise their concerns with New Delhi that some proposed changes in Indian tax laws, including retroactive tax collection, would spoil India's investment climate for them.


"These proposed amendments will have a significant negative effect on our companies, customers and shareholders, and investors in India," the US business groups wrote in a letter Tuesday to US Treasury Secretary Timothy Geithner.


The groups, including US Chamber of Commerce, the US-India Business Council, the Financial Services Forum have urged him to take up the issue with Indian Finance Minister Pranab Mukherjee.


Mukherjee, who is in Washington for the annual spring meetings of the World Bank and the International Monetary Fund (IMF) is scheduled to have a bilateral meeting with Geithner Thursday.


The new Indian proposals, which include ''an unprecedented period of retroactive tax collection, a broad and unclear general anti-abuse rule (GAAR) and an onerous tax on indirect stock transfer, are inconsistent with international tax policy and standards and result in significant erosion of the rule of law,'' the business groups said.


"We encourage you to raise these concerns with your Indian counterparts during the upcoming IMF and World Bank meetings this week," they told Geithner.


While acknowledging that ''every nation has a sovereign right to legislate,'' the business bodies said the new Indian laws are ''troubling'' in a number of major respects noting, "The Finance Bill 2012 includes two dozen amendments that would retroactively create tax liabilities, some for periods of up to fifty years."


Challenging assertions by Indian officials that the retroactive provisions are in accordance with global tax practices, they said "the amendments are much broader in scope and extend for a far longer period of time."


"Such amendments are inconsistent with India's specific obligations to the US under the current bilateral tax treaty. Furthermore, the unilateral definition of treaty terms may significantly alter the benefits and burdens of the existing Income Tax Treaty to the detriment of the US," they maintained.


The business groups said the "unprecedented'' nature of the retroactive tax amendment ''sets a particularly poor precedent and, consequently, we believe it essential that the US treasury speak out so that other countries might be dissuaded from enacting similar policies."


(Arun Kumar can be contacted at


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