P Shome meeting industry every week to sort out tax matters is great, but let's not forget Vodafone
Given the dramatic hike in tax demands over recent years, especially in the number of transfer pricing adjustments, it’s a good thing the finance minister has said that his advisor Parthasarathi Shome would head a forum where industry can come to discuss its tax problems every Wednesday. Direct tax arrears, to cite one figure, have shot up from R2.48 lakh crore in FY11 to R4.82 lakh crore in FY13—within this, transfer pricing adjustments shot up from R44,000 crore in FY12 to R70,000 crore in FY13. Just how frivolous these demands are is best brought out by the fact that, after these cases are dismissed, nearly two-thirds of the cases filed in different appellate bodies are filed by the taxman himself—on average, the taxman loses 50% of the appeals at the tax tribunals and 60% of the appeals reaching the high courts and the Supreme Court.
Earlier, the finance ministry had constituted a committee under former CBDT chief N Rangachary to examine the issues of transfer pricing from the IT sector and some of these recommendations, such as on how to deal with R&D centres of MNCs, have already been notified. On July 10, the CBDT even transferred SK Mishra, the joint secretary in charge of the foreign tax division, to give a strong signal to investors. The problem with the Shome tax forum, however, is that the finance ministry is still to act on Shome’s biggest recommendation in recent times—to drop the controversial retrospective tax amendment.