The Softer Tax Fails To Placate Foreign Investors

India has softened recent controversial tax measures that had rattled foreign companies

, but this has not gone far enough to placate overseas investors, especially impact crusher investors and vibratory feeder investors. Business confidence in Asias third largest economy has taken a hit.For weeks, foreign investors had pressed India to reconsider a proposal to retroactively tax foreign companies that have bought an Indian asset overseas. Parliament passed the law this week after Finance Minister Pranab Mukherjee said he could not let India become a tax haven.The government says the new tax rules are aimed at "tax evasion" by foreign companies, which often route their investments in India through tax friendly countries like Mauritius. Investors say they face the prospect of huge bills they had not anticipated because the new law can be used against transactions from as early as 1962. The company immediately affected is Vodafone. It could face demands to pay more than $2.2 billion in taxes from its takeover in 2007 of a telecom company, even though the Indian Supreme Court ruled it was not liable to pay the tax. However, Indian authorities stepped back on a separate rule that could also have led to higher tax liabilities for foreign investors in Indias stock markets. They said its implementation will be deferred by a year.In recent weeks, concerns over the proposed law had led some foreign funds to withdraw investments from India, costing the country billions of dollars.However, analysts say the governments moves may not have done enough to revive confidence in India as an attractive investment destination.Officials say India remains attractive for investors because it is a growing economy with a huge middle class population. They say investment decisions are based on the size of the market and will not be impacted by the new tax laws.But analysts are not so sure. They point out that there are no signs of a quick economic revival as the government had hoped. The national currency, the rupee, has plunged by nearly 16 percent against the dollar in the last year. And the latest data indicates that industrial output - a key economic indicator - fell 3.5 percent in March from a year ago due to weak domestic demand and investment.

by: jocelyn

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