Retrograde Announcements by F.M.

May 8, 2012

 

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:

 

The announcements made by the Finance Minister in Parliament deferring the implementation of the General Anti-Avoidance Rules (GAAR) by one year and diluting many of its provisions is a meek surrender to finance capital, MNCs and the US administration. The US Treasury Secretary had personally lobbied with the Indian Finance Minister to revoke the GAAR, during the latter’s recent US visit in April 2012.  

 

The GAAR are meant to strengthen India’s tax laws to prevent foreign investors from avoiding paying taxes on capital gains in India, using the Double Taxation Avoidance Agreements (DTAAs) with tax havens like Mauritius. It is noteworthy that over 40% of FDI inflows into India are routed through Mauritius, in order to facilitate crores of rupees of tax savings by foreign companies at the cost of the Indian exchequer. GAAR have been implemented in countries across the world to crack down on such tax avoidance, including in developing countries like South Africa and China in recent times. Dilution of the GAAR in India would lead to the loss of thousands of crores of tax revenues for the Government.

 

Other retrograde announcements made by the Finance Minister yesterday include the cut in capital gains tax on private equity, cut in withholding tax on foreign borrowings and withdrawal of tax on property transactions. These are all meant to favour big financiers and real estate players. The government’s excuses on lack of resources to fund subsidies and social welfare scheme ring hollow in the face of such tax largesse for the big businesses. 

 

The CPI (M) opposes these retrograde announcements made by the Finance Minister.