A letter sent by seven overseas business groups that represent some 250,000 companies warned Prime Minister Manmohan Singh of India that a proposed taxation plan being considered by the Indian government is causing those companies to reconsider their presence in India.
Reuters reported Monday that the proposal, outlined in March in India’s federal budget, would allow the government to claim taxes retroactively on overseas transactions and implement new measures designed to fight tax avoidance. The letter is the newest complaint by the international business community about the Indian government, which has not managed to pass economic reforms that would boost investment and restimulate growth.
The letter, dated March 29, was sent just days before a planned meeting between Finance Minister Pranab Mukherjee of India and George Osborne, chancellor of the Exchequer in the U.K., set to take place on Monday. Global investors have become wary of India over the last year after a number of financial missteps that included a failed try at bringing foreign supermarkets into the country and a protracted dispute with the steelmaker POSCO, based in South Korea, over a $12 billion plant.
In part, the letter to Singh said, “The sudden and unprecedented move … has undermined confidence in the policies of the Government of India toward foreign investment and taxation and has called into question the very rule of law, due process, and fair treatment in India. This is now prompting a widespread reconsideration of the costs and benefits of investing in India.”