A senior official of the Income Tax Department on Friday offered a rare public rebuttal of industry lobbies’ campaign against the General Anti-Avoidance Rules (GAAR) and “retrospective” amendments. Addressing a conference on international tax laws organised by the Bangalore Chamber of Industry and Commerce, P.S. Chhina, Income Tax Commissioner (Bangalore), asked, “Are we a banana republic to be dictated by the whims of investors operating from Mauritius?”

While admitting that there was a need to remove “ambiguities” in tax laws, Mr. Chhina pointed out that the GAAR proposals were made in the context of the growing public outcry about the disruptive and pernicious role of corruption and black money in Indian society.

“Things were blown out of proportion when we tried to fix the loopholes,” he observed.

He said that the media had also played a role in creating a scare that foreign investors would be deterred by GAAR.

“While industry groups have indulged in hectic lobbying against GAAR, Mauritius, a tax haven, is sitting pretty,” he remarked. He conceded that GAAR rules ought to be transparent.

Jahanzeb Akhtar, Income Tax Commissioner, urged industry bodies such as the BCIC to address the problem of “round tripping” by Indian companies.

Round tripping refers to the practice of routing funds (generally black money) from India to tax havens such as Mauritius and then bringing them back to India in the guise of investment by foreign investors.

Infosys Chief Financial Officer V. Balakrishnan said that the moves to amend tax laws with retrospective effect, in the wake of the Vodafone judgment by the Supreme Court, have affected investor sentiment.

K.R. Sekar, partner, Deloitte Haskins and Sells, said that the move has “increased uncertainties in the minds of investors”.

The two-day conference concludes on Saturday.

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