India has softened recent controversial tax measures that had rattled foreign companies, but this has not gone far enough to placate overseas investors. Business confidence in Asia's third largest economy has taken a success.
For weeks, foreign investors had pressed India to reconsider a suggestion to retroactively tax foreign companies which have bought an Indian asset overseas. Parliament passed the law this week after Finance Minister Pranab Mukherjee said he couldn't let India become a tax haven.
The government says the brand new tax rules are aimed at "tax evasion" by foreign companies, which regularly route their investments in India through tax friendly countries like Mauritius. Â
Investors say they face the chance of large bills that they had not anticipated since the new law can be utilized against transactions from as early as 1962. The corporate immediately affected is Vodafone. It will possibly face demands to pay greater than $2.2 billion in taxes from its takeover in 2007 of a telecom company, although the Indian Supreme Court ruled it was not prone to pay the tax. Â
However, Indian authorities stepped back on a separate rule that may even have brought about higher tax liabilities for foreign investors in India's stock markets. They said its implementation could be deferred by a year.
In recent weeks, concerns over the proposed law had led some foreign funds to withdraw investments from India, costing the rustic billions of greenbacks.
However, analysts say the government's moves won't have done enough to restore confidence in India as a pretty investment destination.
A. Prasanna, an economist at ICICI Securities in Mumbai, says India's economy have been losing its sheen as growth slides to around seven percent. “I don't believe anyone should question the intent of the govt. But i believe the quick term problem or the medium term problem that continues to persist, essentially is that reforms aren't moving forward and the investment climate has worsened," Prasanna stated. "That apart, there's a general sense of drift in policy making which has definitely contributed to this problem.â€
Officials say India remains attractive for investors as it is a growing economy with a big middle class population. They are saying investment decisions are according to the dimensions of the market and won't be impacted by the hot tax laws.
But analysts aren't so sure. They mention that there are not any signs of a fast economic revival because the government had hoped. The national currency, the rupee, has plunged by nearly 16 percent against the dollar within the last year. And the newest data indicates that industrial output - a key economic indicator - fell 3.5 percent in March from a year ago by means of weak domestic demand and investment.
From WhatNewsToday.net
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