Fuss created by FIIs over MAT is unjustified
The problem with the popular perception about a pro-growth Government is that it is supposed to be pro-rich and pro-industry, and it is ‘pro’ to an extent that it is willing to bend so far backward that it falls on the ground with its face up. This perception is often sought to be strengthened by an Opposition which is happy enough to latch on to the misconception to secure petty political gains.
When the Narendra Modi ministry assumed charge nearly a year ago, among the first accusations it faced even before it had cleared a single file, was that of being pro-corporate. The message diligently spread around was that soon enough the Government would be doling out tax concessions to the rich while paying lip service to the concerns of the vast majority of the poor population.
Perhaps certain people even in the industry got carried away by the misdirected euphoria and believed that they could get away with all sorts of tax benefits, even retrospectively! They are the ones who are now lamenting over the Government's drive to collect the Minimum Alternate Tax of 20 per cent, which has been imposed on capital gains the Foreign Institutional Investors have made over the years.
Some of the aggrieved parties have even gone to the extent of complaining that the action amounts to ‘tax terrorism’. It was left to Union Minister for Finance Arun Jaitley to pithily state that the “converse of tax terrorism is not a tax haven”. It is quite possible that there may be technical matters over which some of the FIIs have a grievance, or that they genuinely feel that the tax rules are not transparent enough or that they lend themselves to multiple interpretations.
These issues can and must be sorted out. But for the FIIs to say that they should be exempted from paying the MAT on those grounds is not maintainable. It is true that the Budget for 2015-16 has removed the FIIs from the ambit of Minimum Alternate Tax, but this benefit has not been given with retrospective effect. As the Minister said, India cannot become a tax holiday destination.
The Government has laid down a roadmap to encourage foreign investors, but this should not lead the FIIs to believe that they can pocket the capital gains they have made over the past years in the country, without paying taxes.
It would be wrong to use this issue to accuse the Union Government of ‘regressive' taxation policies. If the affected parties believe they have a legal case, they can approach the courts for relief. But on the face of it, they cannot wriggle out of tax obligations which they had knowingly taken on when they made the investments and profited from those investments as on March 2015.
The Government has, through a series of important measures, succeeded in creating a healthy investment and business environment, while also seeking to clamp down on the proliferation of black money through a special Bill. let's judge the Government’s intent and action by the right parameters.