Hinting at a possible Vodafone retrospective tax review, Prime Minister Manmohan Singh on Thursday said that there will be no arbitrariness in tax matters.
Against the backdrop of the controversy over Vodafone tax issue, Prime Minister Manmohan Singh in an interview to a national daily sent out clear signals to foreign investors saying there will be "no arbitrariness" in tax matters. This was his first interview after taking over as the Finance Minister.
The statement assumes significance in the context of a raging controversy over the Income Tax amendment to re-open tax demands with retrospective effect from companies like Vodafone over acquisition of companies having operations in India but registered abroad to avoid taxes.
The amendment and another provision GAAR (General Anti Tax Avoidance Rules) have been blamed for the reluctance of foreign investors to invest in India.
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"The India Growth Story is intact. We will continue to work, as we have been doing for eight years, to keep the story going," he said.
Singh said he wanted to show his government would be fair and that he was keen to cut the red tape.
"We will work towards improving the response time of government to business proposals, cut down infructuous procedures and make India a more business-friendly place," he said," he said.
Singh said "it is necessary that we change the discourse from a critique of an open economy to a critique of what is needed to make an open economy work better for the welfare of the people."
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The Prime Minister also called for a "political consensus" on some policies acknowledging that there are "genuine differences in opinion".
"More important is that we need political consensus in the government on some policies. These are genuine differences in opinion. So, in a democracy, consensus building is the key to long-term economic success and we are steadily moving ahead in doing that," he said.
Noting that a lot of investment avenues are opening up in railways, roads, ports and civil aviation, Singh said "the doors are open for the world to strengthen our hands and contribute to these vital sectors which will give a further push to the economy."
The Prime Minister, who now has the additional responsibility of finance after the resignation of Pranab Mukherjee, said his officials were working on a set of measures to rein in the fiscal deficit.
Singh said the absence of investment avenues has pushed Indian savings into gold.
"We need to open new doors so that savings can be recycled into productive investments that create jobs and growth, not into gold," he said.
Pointing towards the investment plans by soft-drink maker Coca-Cola and furniture group IKEA as proof that things had not deteriorated greatly, Singh said "the chairman of GE captured the picture correctly when he said 'the mood in the market is worse than the mood on the ground'. I agree with that."
Asked about corruption, Singh said he does not think "there has been any explosion in corruption under his watch."
"Just as the pessimism over the economy is more in the markets and less on the ground, even in the case of corruption, I do not think there has been any explosion in corruption under my watch," the Prime Minister said.
Singh also expressed his concern with the distribution of the fruits of development in society.
"Lastly, there is the issue of distribution. We have lifted millions out of poverty. But I worry that the fruits of an open economy will be increasingly captured by fewer people. I worry that a large segment of our population will be left out of the benefits of economic growth. We need to correct that fast," Singh said.
With PTI inputs