Economy Mar 2, 2013
Clarifying the government's stance on the Double Taxation Avoidance Agreements (DTAA), the Finance Minister P Chidambaram said in an exclusive interview to CNBC-TV18 that Mauritius should not be the preferred route of investment.
"Investment comes from over a 100 countries, so I don't think Mauritius can or should be the preferred route for investment. There are other routes for investment but Mauritius does give a certain advantage to the investor today. If the advantage is enjoyed by genuine Mauritius resident or businessmen, then we have no complaint," he elaborated.
He, however, added that participatory notes (P-notes) holders will not be touched by General Anti Avoidance Rule (GAAR).
Reference of tax residency certificates (TRC) in Union Budget 2013 had sounded the alarm on Dalal Street for which the finance ministry had to issue a clarification that that there was no intention to question tax residency certificate holders and "TRCs will be accepted as evidence of residence."
He added that "The India-Mauritius DTAA is under discussion with Mauritius for about the last six or seven years. We would like that treaty to be revised, but we are not going to do it unilaterally. We want to do it in discussions with Mauritius which is a friendly country."
On why the Budget was silent about retrospective taxation, Chidambaram clarified that there is no pressing need for him to move the amendment and that it can be moved only after the Vodafone issue is resolved, which is what gave rise to the controversy in the first place.
"Once the Vodafone issue is resolved there will be clarity about how to word whatever amendments have to be worded. We can always move an official amendment. If the issues resolve say by March or April we can always move an official amendment," he said.
Admitting that India needs to protect its tax base and revenues, he denied that MNC's are being made soft targets in India. "We have got money coming to India both as foreign direct investment (FDI) and FII. There are companies investing in India. Why do you assume that anyone is being made a soft target?, said Chidambaram.
Given the fact that this was UPA II's last Union Budget before general elections of 2014, expectations were that the FM would focus on wooing FII investors and attract more inflows into the country. However, Chidambaram who was presenting his eight Budget chose to play it safe with a pragmatic Budget rather than a populist one.
However, when questioned on party members becoming more populist closer to the elections, Chidambaram said he was confident of the Congress going into elections if there is growth, more jobs, tamed inflation and the people have the confidence that tomorrow will be better than today.
"Politicians and political leaders are not as dim-witted as some of you think. We also have our heads screwed to our shoulders. So, just as people silently applaud stability and growth, politicians also see the virtue of stability and growth. You may not attribute that much common sense to politicians but speaking as one let me tell you we believe in growth and macro economic stability. There is no reason to believe or think that anyone will scuttle that policy," he said.
While the Opposition finds Chidambaram's Budget insipid, rating agency Standard & Poor's says this year's Budget would have no impact on the country's sovereign credit ratings.
Another let down for the country was the Q3 GDP data. India's growth slowed to a 15-quarter low of 4.5 percent in the October-December quarter lower than the 5.3 percent a quarter ago, and the 6 percent growth seen a year-ago. He expects the economy to grow at 6.5 percent in the next financial year.
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