Press Release

Kuwait: While amending 1961 Income Tax Act Indo-Kuwait Friendship Society has asked Government of India not to amend the Law of taxation related to Global Merger and Acquisition Transactions involving Indian assets. In a memorandum sent to India’s Finance Minister Pranab Mukherjee, IKFS has requested not to implement taxation based on retrospective deals which will definitely might hit fund flows into India by Overseas Investors. To charge retrospective taxes for an investment already been in place for decades cannot be justified. Majority of the Investors from across the world are concerned over the proposed tax amendment.

The recent proposals submitted by Finance Minister Pranab Mukherjee during the 2012-2013 Budget discussion, that “to amend the 1961 Income Tax Act retrospectively to allow authorities to tax global merger and acquisition transactions involving Indian assets and shares” will not a good idea rather, it will scare and abstain investors for further investments in India, which will adversely affect the Indian Economy. The amendment, if and when passed by parliament, will bring into the tax net overseas transactions thousands of Crores.

Dr. Ghalib Al-Mashoor, President of IKFS said that the day when the law started implementing of levying retrospective charges, (this one time money) will jeopardize the interest of India’s so called liberalized Foreign Investor scheme. Overseas investors will lose confidence on further investments in India and cannot be justified as if we are going back to 30 years. Therefore, IKFS sees that this proposal is a dangerous and will not serve the long term vision on India’s economic growth. The law will discourage foreign investors for further injecting capital into Indian Industries and will have set back on the credibility of overseas investments authority.

The question is whether India is self sufficient? Yes, The growth rate of 6.9 percent would be considered fantastic from the point of view of the advanced economies. Al-Mashoor said that self reliance only on domestic consumption will not develop more growth in an economy which has been certified as under-developed for few years ago. Therefore, without foreign capital inflows, feeding One Billion Plus population out of poverty will be difficult on a long term. However, to levy tax on foreign capital? Yes!!! But we have to prepare best investor guidelines and reforms should be spelled out with brave ideas that India is no more a tax haven country.