India should be setting standards, not copying others.

Under the Congress we had GAAR, which may sound as a frustrated growl but stands for General Anti-Avoidance Rule, which sought to tax profits earned by foreign companies, some going back 60 years. When foreign funds threatened to leave India the government meekly surrendered and deferred the proposal by 3 years. Now our tax fellows have asked foreign investors to pay MAT, a Minimum Alternative Tax, on profits made in past years. New government, different name, but same intention. Till today foreign investors were required to pay 15% capital gains tax on short term profits from equity, 5% tax on profits from bonds and nothing on long term capital gains on equity. With this demand for MAT the government looks to raise $8 billion, or Rs 600 billion, in extra taxes. " It suggests that the government can come out at any time and re-clarify what was believed to be an established policy," said Patrick Pang from Hong Kong. ' Re-clarify ' is a polite word for ' liars '. To that our most esteemed Finance Minister growled," Let it be understood that India is not so vulnerable that every legitimate tax demand can be considered tax terrorism, because we are not a tax haven and we don't intend to be one." Valiant words indeed. But we are entitled to ask what our noble tax fellows were doing all these years. Why do they not collect legitimate taxes every year? Our Finance Minister is a lawyer, as were the previous two. Why not write tax laws in simple terms so that there is no danger of different interpretations or dispute? But then again, if the law is simplified there will be no demand for lawyers and their earnings will drop. A few days later our Finance Minister was launching a Gujarat International Finance Tec-City, cutely known as GIFT, which will have International Financial Services Centres, or IFSC. Who are these gifts for and why are they necessary? Turns out that India has lost 50% market share in trades on NIFTY futures, which deals with the stock market, to Singapore and on rupee-dollar futures to Dubai. Trades in currency futures amount to Rs 2 trillion per year so the government wants some or all of that action. But to compete with Dubai or Singapore taxes in these centers have to be lower. " We are trying to present a taxation regime that is internationally compatible, which is non-adversarial," said the Finance Minister. That is precisely the demand of every citizen. That our politicians and civil servants should look to serve us and not be adversarial. Taxes should be fair, laws should be easily understood by everyone and there should be continuity of laws so that individuals and companies can plan their finances for many years into the future. We should be setting examples for others to follow. Instead we choose to remain third world.