Stable tax regime key to attracting investments: Infy

India needs to address economic challenges deftly through measures which should include a stable tax regime and restore investor confidence to regain its image as a destination for global investment, said Infosys Limited Chief Financial Officer V Balakrishnan.

"We need to maintain growth by tackling both internal and external challenges. While political instability and policy paralysis are causes for concern, the General Anti-Avoidance Rules (GAAR) have thrown up uncertainties for businesses and shaken the confidence of investors.

We need to correct our internal imbalances and also ensure a stable tax regime, including GAAR," he said, delivering the keynote address at a two-day ‘International Tax Conference’ organized by the Bangalore Chamber of Commerce and Industry.

He also said Europe could slip into negative zone from the current levels of modest growth while Japan is facing deflation. These, coupled with the uncertainty over rollback of tax cuts by the US in the wake of the presidential elections, are posing challenges in attracting investments for emerging markets (like India).

The economic slowdown in India would lead to decline in tax collections, forcing the central revenue department to look at ways and means to step up collections, which could in turn, lead to misinterpretation of tax laws including GAAR, Balakrishnan added.

Commissioner for Income Tax, Department of Income Tax, Bangalore, P S Chhina said that the Shome Committee appointed by the Prime Minister to look at some of the issues pertaining to GAAR will address many issues and enable a positive investment climate to emerge in India. The Committee is expected to submit its report by the end of September this year.

Additional Director (International Taxation), Department of Income Tax, Bangalore, V S Sreelekha spoke about the complex nature of tax evasion indulged in by MNCs who resort to “corporate inversion” (shifting the headquarters to tax havens) and leverage technology to camouflage transactions to avoid taxes. This has increased the challenge for taxmen. “Public finances are strained, so tax collection has acquired more significance,” she said.