NEW DELHI – British finance minister George Osborne on Monday criticised an Indian plan to retroactively tax business deals, saying it could damage foreign investment in the fast-developing country.
A proposal to allow Indian authorities to make retroactive tax claims is widely seen as targeting British mobile phone giant Vodafone, which has been battling the New Delhi government over alleged unpaid taxes.
The company in January won a Supreme Court case against the government’s bid to tax the firm over its $10.7-billion takeover in 2007 of Hong Kong-based Hutchison Whampoa’s Indian unit.
But finance minister Pranab Mukherjee then announced a move to bypass the court ruling, adding to growing wariness among foreign investors about putting their money in Asia’s third-largest economy.
“We are concerned about the proposed budget measure,” Osborne said after talks in New Delhi.
“Not just because of its impact on one company, Vodafone, but because we think it might damage the overall climate for investment in India.”
“I was quite candid about that with my Indian counterpart,” he told reporters. “What India needs, like all countries, is a stable and predictable tax system to encourage investment.”
New Delhi’s planned change to the Income Tax Act would be retroactive to 1962 and would oblige domestic and foreign firms to pay tax on any overseas transaction involving an Indian asset.
