Need for policy predictability to allay investors fears: PMEAC

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Prime Minister's economic advisory panel on Friday said government should pay special attention to allay investors' apprehensions on taxation front by bringing in policy predictability.

"There is a need to specifically focus and address the apprehensions that have been occasioned by perceptions of arbitrary actions on tax and other fronts," Chairman of Prime Minister's Economic Advisory Council (PMEAC) C. Rangarajan said while releasing the Economic Outlook of 2012-13.

He pitched for "policy predictability" among other initiatives to address the weaknesses that presently affect the country's growth story.

The suggestions come in the backdrop of amending the Income Tax Act with retrospective effect and bringing in General Anti Avoidance Rules (GAAR) provisions.

While the retrospective amendments have come into force, government postponed the implementation of GAAR after concerns raised by certain section of investors including from abroad.

Prime Minister Manmohan Singh has set up an expert committee to address the concerns of foreign investors.

Finance Minister P. Chidambaram recently said: "Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, fair mechanism for dispute resolution and independent judiciary will provide a great assurance to investors. We will take corrective measures wherever necessary."

The Economic Outlook report further said that in general, the atmosphere must be seen as being encouraging of investment, rather than 'being fault-finding and antagonistic'.

"The problem is larger than that of the attitudes within the government alone, but at least they can be sought to be remedied within the government system," it said.

The retrospective amendment to tax laws is aimed at bringing into tax net overseas mergers and acquisition involving Indian assets. It also sought to undo the order of the Supreme Court in the Vodafone tax case.