Geithner presses India on proposed changes to tax law

Geithner presses India on proposed changes to tax law

Washington: US treasury secretary Timothy Geithner on Thursday, reflecting concerns in the US business community, pressed Indian finance minister Pranab Mukherjee for reassurances India remains open to foreign investment, a US Treasury Department spokeswoman said.

“In this regard, the secretary noted that certain tax provisions in India’s fiscal year 2013 budget have raised significant concern amongst US industry and dampened enthusiasm about India’s investment climate," Treasury spokeswoman Kara Alaimo said in an email.

The Treasury Department is also “examining India’s proposed tax provisions to determine their impact on the US-India bilateral income tax treaty," Alaimo said.

The US Chamber of Commerce, the US-India Business Council, the Financial Services Forum and nine other US business groups wrote Geithner on Tuesday, urging him to press Mukherjee on the issue.

“These proposed amendments will have a significant negative effect on our companies, customers and shareholders, and investors in India," the groups said.

The recent budget proposal would retroactively impose a capital gains tax on merger and acquisition deals conducted overseas where the underlying asset is located in India.

It would amend 50-year-old tax laws to allow New Delhi to pursue taxes on long-concluded transactions.

“Despite assertions by Indian officials that these retroactive provisions are in accordance with global tax practices, the amendments are much broader in scope and extend for a far longer period of time," the US groups said.

Mukherjee is in Washington for the annual spring meetings of the World Bank and International Monetary Fund.

An international coalition of business groups also wrote Indian Prime Minister Manmohan Singh in late March to complain about the proposed tax changes, which they warned could discourage further investment in India.

Geithner encouraged Mukherjee “to reassure foreign investors that India will continue to welcome foreign capital, by advancing important economic reforms that will increase opportunities for bilateral trade and investment and strengthen India’s business climate through greater transparency and predictability," Alaimo said.

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