Retro tax needs an overhaul: Parthasarathi Shome

Dr Parthasarathi Shome says it will be difficult for any government to collect tax dues, unless full-fledged changes are made in the tax laws.

We cannot be in a situation where we create an impossibility to perform. If you create a situation where the taxpayer cannot perform then there is no point; you are not going to collect the money

Parthasarathi Shome

Advisor to FM & Chairman, TARC

Tax Administration & Reform Commission

UPA government's policy on introducing retroactive tax changes may need a full overhaul in the coming months.

Speaking exclusively to CNBC-TV 18, advisor to the finance minister P Chidambaram and chairman of the Tax Administration Reform Commission (TARC), Dr Parthasarathi Shome says it will be difficult for any government to collect tax dues, unless full-fledged changes are made in the tax laws. He also says the new government will have to particularly work hard in bringing clarity and certainty in India's tax policy.

"We cannot be in a situation where we create an impossibility to perform. If you create a situation where the tax payer cannot perform then there is no point; you are not going to collect the money," he said.

He thinks a balance needs to be struck in cases like dispute resolution, dispute management and dispute prevention.

In case of India, he thinks the best method would be to minimise retrospective amendments. He is of the view that retrospective amendments, including definitions, need a comprehensive relook and the government should come out with guidances on such tax disputes, which are common in Australia, UK.

TARC is likely to release its first set of recommendations in May, which will include dispute resolution mechanism.

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