FM pitches for low taxes, taxpayers as ‘partners not hostages’

Washington: Promising a ‘modern tax system’ with low and globally competitive rates, Finance Minister Arun Jaitley has assured foreign investors against any retrospective action and said taxpayers will be seen as “partners and not as potential hostages or victims”.

Finance Minister Arun Jaitley
Finance Minister Arun Jaitley

For domestic taxpayers also, the rates need to be low as taxes are seen as money being forcibly transferred from citizens to the state, but the tax net should be wide enough so that everyone feels being part of the government, he said.

Jaitley said he is “acutely aware” that there are concerns about retrospective taxation, tax harassment and arbitrariness in tax administration, especially those relating to cases of transfer pricing — a term mainly used for deals between entities belonging to the same multinational group.

Asserting that the government is committed to a transparent and predictable tax regime, Jaitley said: “These are not expressions of intent and we have translated them into action.”

He also said that several steps have been taken to reduce litigation and the tax authorities have been asked not to “file frivolous appeals in a routine manner”, while the government did not contest high court orders that went in favour of Vodafone and Shell.

“Let me emphasise that we are absolutely committed to a transparent and predictable tax regime. There will be no retrospective actions and we will see taxpayers as partners not as potential hostages or victims,” Jaitley said in his address to the Peterson Institute for International Economics here last night.

Spelling out his vision of a modern tax system, Jaitley said: “Tax policy and administration should incentivise compliance. They should be administered fairly, transparently, with minimum discretion, with no harassment of taxpayers but also ensuring that tax evasion is dealt with firmly.”

“We will aim to keep the rate competitive and close to international levels and minimise exemptions,” he said.