Tried to clarify some topics in report: Parthasarthi Shome

The Shome panel's report on the retrospective amendment with regards to the indirect transfer is public now. Parthasarthi Shome shares his views with Aakansha Sethi of CNBC-TV18.

Below is the edited transcript of his interview. Q: You have mentioned that the provisions should be applied prospectively. The government is concerned that if they apply it prospectively it will be too much of a policy flip-flop?
A: I don't want to be or I am anti-thesis of a taxman. I am a taxman in terms of policy and administration. I have tried to clarify some matters in the report like indirect transfer and the other matter on prospectivity or retrospectivity. Prospectivity is essential because it reduces the impossibility burden on the tax payer. So, that is where I am coming from.
In terms of indirect transfer we have said that there is a role for indirect transfer even though there are many countries that do not tax indirect transfer. Many countries including Sweden and Brazil have prohibited retrospective taxation. So we have taken the position in the committee that retrospective taxation is not a good idea. Our first recommendation is prospective, but in case the government does go on for prospective we have given all the details. Q: Would you recommend this Bill be moved in the winter session itself?
A: That depends on the policymakers. My job was to write the report within a timeframe and we have worked very hard to do that. Now we will have to follow the finance minister. Q: Do you think this would be the cleanest option for the FM to get out of this mess?
A: I cannot say that, in the last paragraph of the executive summary we have said that it is really time to clean up and this will be helpful. This will take away the uncertainty from the tax payers and at the same time it will protect government revenue. Q: The finance ministry is concerned that if they waive off penalty and interest for all the companies then the constitutional amendment will not be legally tenable because then it would be to extend the tax base and not as a clarificatory retrospective amendment, which they had been maintaining all this while. So, do you think by making it they will lose the case in the two courts that it is on if they waive penalty and interest?
A: I don't know whether they will lose the case, we have very clearly said in the report that the committee did not feel that it was just a clarificatory statement. Infact it was a revenue expanding move. So, we have moved back from that. Q: FIIs and participatory notes have been left out of the Section 9 retrospective amendments. Do you think this will come as a positive sign to investors and is this in line with what is done internationally?
A: Yes. It certainly should come as a positive for the international investors and it is very common abroad. First and foremost participatory notes are everywhere imperceptible and therefore it is common practice and common sense.