The retrospective tax amendments introduced in Budget 2012-13 by the then finance minister Pranab Mukherjee continues to impact investments planned by global investors in to India. They they are waiting for the final judgment on Vodafone before announcing any investment in the country.
Geoff Barnes,CEO and president of Baker Tilly International,a global accounting and business advisory firm headquartered in London,said that the Vodafone judgment may set the precedent.
If Vodafone lose this case people will look to hold-on for the moment and will factor in the same in their investment strategy in India, said Barnes,adding that there are some big issues in stake on this.
They will then see if they want to go to Vietnam or somewhere else.
The issue revolves around Vodafone buying 67 per cent in Hutchison Essar for $10.7 billion in 2007 and which is facing a tax liability of around Rs 11,000 crore. While Supreme Court had set aside a Bombay High Court order asking Vodafone to pay the tax of around Rs 11,000 crore,the government and the finance minister amended the Income tax Act with retrospective effect that made the Vodafone-Hutch deal taxable.
Barnes who is also the chairman of the International Advisory Panel of the Institute of Chartered Accountants in England and Wales said that one cannot introduce legislation that goes back and this legislation has changed the rules.
Why would somebody invest millions and billions in a country with one set of rules and have those rules changed later, he said adding that legislation has to be fair,commercial and realistic if one wants the commercial environment to prosper. It is unusual to have retrospective legislation.
While India continues to remain an important destination for investors,the retrospective legislation has seriously dented investments lined-up for India.
Barnes,however,said that the bureaucratic hurdles that are being talked in India with respect to projects not taking-off,is not special to India and is a case in almost all countries.
India is not the only country with such issues. Every country has red tape and the challenge for Indian businesses,government and legislation is to minimise the red tape to create an environment where business could prosper, said Barnes.