In its pre-Budget memorandum submitter to the Union Finance Minister, US India Business Council asked Chidambaram to ensure that any changes to India's income tax law "will not be retrospective", as well as "provide clarification" that recent changes to that effect will be legally binding and not subject to arbitrary application.
Prominent among the wish list include updating India-US bilateral tax treaty, emanation of double taxation on software revenue, 15 year tax holiday for software technology parks and special economic zones.
It also calls for ensuring that transfer pricing principles are applied in fair and consistent manner for all tax payers and an assurance that any change in the income tax law will not be retrospective.
Commending the proposal of important clarifications by the Prime Minister's Expert Committee on GAAR and the recent decision to defer implementation until 2016, USIBC said in order to plan long-term capital allocation and employment- generating investment into India, global investors look forward to final confirmation of these guidelines at the earliest point possible.
"While the proposed guidelines have granted substantial assurances, global companies require predictability and remain concerned about how such assurances will translate into law," USIBC said in its memorandum.
Of the believe that Goods and Services Tax (GST) would dramatically increase government revenue while streamlining operational and cost planning for business, while potentially decreasing some tax rates, USIBC said it remains prepared to support the development and expeditious implementation of a revised DTC (Direct Taxes Code).
"An updated, harmonised direct tax framework would have tremendous multiplier effects to fiscal balance and macroeconomic stability, which clearly benefits consumers, domestic industry, and global investors in India," it said.
USIBC said one of the primary frustrations of foreign multinational companies investing in India is an often inconsistent transfer pricing regime and a lack of a predictable, efficient dispute resolution mechanism.
As such it asked the Finance Minister to ensure that transfer pricing principles are applied in a fair and consistent manner for all taxpayers, as well as allow a reasonable method for determining transfer pricing comparables to support fees on services performed in India for non-Indian affiliated entities that match the nature of the company's services performed.
"As international norms dictate, transfer pricing principles should never be viewed as a selective and arbitrary mechanism for raising revenues," it said.
"In the interim, we believe the GOI and the US government should consider adopting alternative dispute resolution procedures to more efficiently and expeditiously resolve tax disputes. Specifically, the two governments could consider an MOU for Binding Arbitration,"
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