06/04/2015 2:59 PM IST | Updated 15/07/2016 8:25 AM IST

India Not A Tax Haven, Foreign Funds Must Pay Legit Dues, Says Arun Jaitley

MONEY SHARMA via Getty Images
India's Finance Minister Arun Jaitley gestures as he speaks during the third annual Growth Net summit in New Delhi on March 25, 2015. The Growth Net summit, first convened in 2012, is an international conference focusing on growing economies in Asia, Africa and Latin America. AFP PHOTO/MONEY SHARMA (Photo credit should read MONEY SHARMA/AFP/Getty Images)

NEW DELHI — Finance Minister Arun Jaitley said today that asking for legitimate tax dues is not tax terrorism, and that India is not a tax haven.

Appearing to defend the tax notices sent to about 100 FIIs totalling US$ 5-6 billion, he said "taxes which are payable must be paid".

"India is not so vulnerable that every legitimate tax demand is considered as tax terrorism. We are not a tax haven and we don't intend to be one," he said while addressing CII's annual general meeting.

In the biggest-ever tax demand, nearly 100 foreign funds have been asked to cough up an estimated $5-6 billion for 'untaxed gains' made by them in the Indian markets over the past years. The Income Tax department has imposed 20 per cent Minimum Alternate Tax (MAT) on capital gains made by FIIs.

Jaitley in his last budget speech proposed to scrap MAT on capital gains made by FIIs.

"Taxes which are not payable must not be paid. They should be challenged...but taxes which are payable must be paid," he said, adding "Our fairness has been partly misunderstood. The converse of tax terrorism is not a tax haven."

Stating that some decisions of the past have made the taxation regime adversarial, he said, "an emerging economy that expects investment cannot indulge in what has been referred to as tax terrorism or very aggressive tax laws".

"But our fairness has been fairly misunderstood. The converse of tax terrorism is not a tax haven. If I read the front page of some newspapers, it is the impression that I get," he said referring to tax demand notices on FIIs.

Commenting on the tax notices, Revenue Secretary Shaktikanta Das said, "I think what FIIs and FPIs are asking is retrospective exemption and not retrospective application of a tax law. Because MAT was leviable on them, therefore these assessment, these demand have been raised."

He said that some Foreign Portfolio Investors (FPIs) and Foreign Institutional Investors (FIIs) had gone to the Authority of Advance Ruling (AAR) which ruled that MAT was applicable. "Naturally the Income Tax Assessing Officers have raised the demand," he said.

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