over the years.
As such adjustments crossed Rs 10,908 in 2009-10, the foreign direct investments (FDI) into India too started faltering, although it may have been impacted by the global economic crisis. The FDI inflow is still off from the $ 41.8billion it scaled in 2008-09.
Avoiding frivolous tax claims is another change businesses expect from the new government.
According to a Deloitte survey of 781 cases decided by the Income Tax Apellate Tribunal, only in 15% cases, the taxman's demand has totally been upheld. In about 47%, tribunal decisions favoured tax payers, while many others were sent back to the authorities for fresh adjudication. This has given rise to a regime of uncertainty causing multinational enterprises, both foreign and Indian, to rethink their growth plan for India, said SP Singh, senior director, Deloitte Haskins & Sells.
“Time has come to make substantial changes in legislation and enforcement of transfer pricing rules, as minor changes will not provide sufficient respite. A systematic reform is needed,” Singh said.
Sources said that in many cases, officials go ahead with making a tax claim just because his predecessor had done so. Tendency to err in favour of the government in view of obligation to meet tax targets leads to a situation where the official is unable to uphold the law without worrying about its implications for the exchequer or for the tax payer.
According to Central Board of Direct Taxes, the total tax arrears or disputed tax demands is as high as Rs 4.82 lakh crore, most of which (97%) is difficult to recover for a host of reasons ranging from sickness of the corporate taxpayer to difficulty in tracing the assessee.
The BJP manifesto makes references to the need to deal with "tax terrorism". “One does expect some quick steps to address concerns on this front, particularly for international investors, who have been particularly badly impacted by a very aggressive approach, and equally aggressive interpretations,” Ketan Dalal, joint tax leader, PwC India. Building consensus with states for introducing the proposed Goods and Service Tax is another priority for the new government.
According to Rahul Garg, direct tax leader, PwC India, the new government may accord priority to addressing legislations that are seen as bottleneck to investment. The Budget for 2014-15 may include a clear road map on tax policy, especially GST, he said.