India consigns its tax time-machine to the past

The case of the retroactive tax illustrates the country’s strained relationship with foreign investors


  • by
  • 08 14, 2021
  • in Finance and economics

WHEN INDIABJPBJP introduced a retroactive tax on the sale of shares in foreign companies with domestic assets in 2012, the measure was reviled by foreign businesses and decried by the Bharatiya Janata Party (), then in opposition, as “tax terrorism”. So foreign investors had reason to cheer on August 5th, when the government said it would repeal the law. The reversal illustrates the tug-of-war the country has long faced—between wanting to invite foreign investment into the country and resenting the legal tussles it brings.The immediate reason for the repeal reflects the government’s desire to save itself from embarrassment overseas, rather than a dramatic conversion to an open approach to foreign investment. The tax law has led to legal headaches at home and abroad. Two big companies have successfully disputed their retrospective bills in international courts, but the government has not complied with the rulings, leading one of them to take some drastic steps.

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