Pranab Mukherjee, in his tax proposals on March 16, is under pressure to get growth back on track and to get his fiscal house in order. That requires a huge balancing act.
Mukesh Butani, chairman and managing partner of BMR Advisors, Dinesh Kanabar, deputy CEO and chairman of the tax practices at KPMG and HP Ranina, the brightest minds, feel that the FM needs to make a Budget that has prospective amendments and not retrospective amendments as that is the key to ensure growth in India.
Also, they suppose he will roll back indirect taxes to the pre crisis stage, but hope that he will not increase the corporate tax, which is anyways the highest in the world.
They propose a wealth tax on undeclared gold as gold accumulation is the highest in India. They also feel that the government should set up an efficient machinery and collect revenue through the taxes logged in disputed liabilities.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying videos.
Q: Let us talk about the Vodafone case. Very often during Budgets when the government has lost something, not as big as the Vodafone case but when the government wants to sidestep what the courts have done, they come up with amendments which enable them to go back and win the case. Do you expect anything on that in this Budget? Alternatively, do you think since review petition is still on, he may not do anything now?
Kanabar: In some sense the Supreme Court judgement actually gives a direction to the government to welcome to tax these transactions, but you are welcome to make the law in a manner that can tax the transaction and put it prospectively. It does not say that change the law prospectively but in a manner that everybody is aware of its liabilities. For example, in the concluding part of the main majority judgement when Justice Kapadia says that FDI is a very important aspect for the development of a country and FDI flows into those sectors or those countries where there is a certainty of law. Therefore what he meant really was to say, you have a right to tax whatever transaction you want but taxing in a manner that people are aware of their liability before the transaction happens and not do something retrospectively. That is sending a very, very strong message to the government to say that there should not be a retrospective amendment. However, here was one of those rare times when the government did not change the law. So for example, the Vodafone thing began about 4.5 years back. In those 4.5 years, four Budgets were presented.
Q: So they had an opportunity to do that.
Kanabar: They had an opportunity to change the law prospectively. Had they done that maybe they were worried that it might reflect on Vodafone to say that a change in law is the only way to tax such a transaction. In the absence of such a change, Vodafone could not have been taxed, but there were certain other transactions that happened which could have potentially been taxed and the government maybe lost out an opportunity to tax those transactions. I do hope that India will not stand out to say that somebody can take years and years to fight within the judicial system, reach a conclusion only to be told that the law has been changed retrospectively. I do not think that sends out a right signal for the country as a whole.
Q: But it has been done in the past, hasn