The latest political controversy in the public domain is
about the retrospective tax: to be precise whether the then fiance minister and
the present President of India Pranab Mukherjee did consult the former Prime
Minister Dr Manmohan Singh when the government wanted to go ahead withthe tax even after Supreme Court decision on Vofofone . The issue came up at a function: a book
launch. The finance minister of immediate past Mr. Chidambram,
that, " .... I think, I think the matter was discussed at some level when
the decision was taken...." When further probed, the canny lawyer turned
politician ducked the question by telling that he would reveal more when he writes his
book. That wry humor is characteristic of Mr.Chidambram.
The public wants to know more about the thinking of the government and it is their right. Why the government wanted to go beyond the apex court's decision? Why the then opposition party and now the ruling party, which criticized the government's decision at that time telling that it would affect the flow of FDI into the country , is now going soft on retrospective tax regime. The Budget proposal has mentioned only that the present administration will not go for any retrospective tax regime. What about the tax regime that existed before? What about the state and findings, if any of the proposed empowered committee which would go into the whole issue and come out with their suggestions? Will a decision come out soon or we have to wait until the presentation of the next budget?
There are myriad issues surrounding the retrospective tax regime and specifically on Vodafone case. If two parties buy and sell an underlying asset in a third country, the home country (third country) does not have any jurisdiction over it? What is the settled international law? Is it the first case ever happened in the world? If it is not happened for the first time, what are the procedures / decisions taken in other countries?
I would not have asked this question, if the last three successive finance ministers were not lawyers. The last two are eminent lawyers and the third is considered as a person having wide administrative experience (He also has a law degree).
Linking Vodofone case with flow of FDI, I think is stretching things too far. FDI is not an end in itself. It can at best supplement and complement the investment. I do not know precisely the ratio of FDI to the total investment in the country for the 15 years or. My hunch is that it pales to insignificance as compared to the ratio to domestic investment. My last question: Is it fair to give that much importance to FDI at the cost of general public, who get enriched by more revenue realization by the governemnt?
Business Economics and services Team (BEST)
