Concerned over the Rs 10,247 crore tax notice slapped on Cairn Energy by Indian authorities, UK on Thursday asked India to provide "predictable, stable and attractive" business environment and not only talk about it.
British Foreign Minister Philip Hammond, who arrived in India yesterday on a two-day visit, met Finance Minister Arun Jaitley earlier in the day and raised the Cairn tax issue with him. Jaitley reiterated government's assurance that it will not issue any new notices for retrospective tax demands, he told reporters.
The visiting minister also advocated scrapping of retrospective tax demands to make India an attractive investment destination. Hammond said, however, Jaitley told him that the tax case involving Cairn has to be resolved through the courts as the process has already started. "It (Cairn tax case) did come up during my meeting with Jaitley.
For India to attract investments, it is not enough to say we are open to business as Prime Minister Narendra Modi has done.
"The country also has to set out clear signals that the business climate and business environment is predictable, stable and attractive for international investments," the British minister said, adding that Jaitley "explained that this particular tax demand is being sent out pursuant to a notice that was issued by previous government."
Asked if he was satisfied with the assurance or scrapping of the tax demand against Cairn Energy would be a good deal, Hammond said, "Ultimately, scrapping any retrospective tax legislation would be a good way to reassure the investors."Anything that could be done to make legislative position more certain, clear and free of retrospectivity will make India more attractive investment destination."
But he noted that Jaitley has made it clear that the present case has to be resolved through courts.
Earlier this week, Income Tax Department slapped a Rs 10,247 crore (USD 1.6 billion) tax demand on Cairn Energy Plc, for an alleged Rs 24,500 crore worth capital gains it made in 2006 while transferring all its India assets to a new company, Cairn India, and got it listed on the stock exchanges.
Cairn joins a slew of multinational firms including Vodafone Group Plc and Royal Dutch Shell Plc that have been slapped with retrospective tax demands by Indian authorities.
Noting that business hates restrospectivity because that Noting that business hates restrospectivity because that means business cannot plan, Hammond said he suggested to Jaitley that he should make it "loud and clear" during his UK visit from tomorrow that the government will not issue any fresh notices on retrospective tax demands.
"It would be a good idea if he could make that message loud and clearly in London tomorrow at investors conference. Because it (tax issues) is on the mind of investors and there is a real danger that it will undermine the message government is seeking to send out," he said.
Asserting that it was in the interest of both UK and India to have a climate that was conducive for investments in India by British companies, the minister it was government's duty to represent the interest of Cairn as a British company.
"They (Cairn) are of course not happy that the demand has been issued and fiercely contest that there is any tax maintaining that they are fully compliant to their tax obligations and do not owe this tax and we will continue to press the government on the case," Hammond added.
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