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Updated: September 19, 2009 21:15 IST

Pranab seeks to allay concerns over Direct Taxes Code

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Union Minister for Finance Pranab Mukherjee during the press conference in Bangalore on Saturday. Photo: K. Bhagya Prakash
The Hindu Union Minister for Finance Pranab Mukherjee during the press conference in Bangalore on Saturday. Photo: K. Bhagya Prakash

Addressing concerns over the proposed features in the Direct Taxes Code, the Finance Minister, Pranab Mukherjee, on Saturday said changes in MAT is necessary considering big revenue loss due to lowering of both personal and corporate income tax rates in the Code.

“It must be remembered that the new tax code grandfathers the plethora of exemptions available under the old law ...The revenue loss due to them will continue to be incurred for a decade or so. At least for this period, an additional revenue measure such as MAT is necessary for the government to meet its expenditure obligations,” he said.

The MAT at present is linked to the book profits whereas the Code proposes that MAT be levied on assets of companies.

The Minimum Alternate Tax is levied on companies which do not come under tax net due to various exemption granted to them.

The Finance Minister was speaking at an interactive session with industry captains to seek feedback on the proposed Direct Taxes Code.

In the context of relief from double taxation, he said lots of apprehensions have been expressed over provisions in the code. Clarifying that between the Direct Taxes Code and the double taxation treaty, “the one that is later in point shall prevail”, he said.

He further said “any further increase in the fiscal deficit can lead to implicit taxation of profits through increase in interest rate”.

“In case any international agreement/treaty leads to unintended consequences like tax evasion or flow of benefits to unintended persons, it is open to the signatory to take corrective steps to prevent abuse of the treaty,” Mr. Mukherjee said.

Earlier, the Finance Minister had announced that India would be revisiting the double tax treaties with some nations like Mauritius and Switzerland.

He pointed out that India has an unblemished track record of fulfilling her international obligations and said there was no reason for any international investor to be apprehensive on this count.

Addressing fears of flight of capital and fluctuations in investment climate, he said, “India is a land of emerging opportunities and its magnetism is and will remain irresistible for people and capital alike“.

On fears of fluctuation in investment climate, based on frequent changes in domestic laws and need for re-negotiating treaties, he said, “Appropriate steps will be taken to assure the treaty partners that mutual beneficial provisions of existing treaties will remain valid even after implementation of the new tax code”.


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