World Bank chief bats for Pranab on changes in tax laws

Batting for Finance Minister Pranab Mukherjee's proposal to tax Vodafone type deals, the World Bank president Robert Zoellick on Friday said that India wants the company should pay tax at some place and investors must give some time to the government to explain the details.

"Indian government is sensitive that they want to have an environment that draw both domestic and foreign investment and so I hope investors give the Indian government time...," Zoellick told reporters when asked about government's intention to introduce proposals to tax overseas investments.

Referring to his discussions with Mukherjee and senior government officials, he said, "the heart of the policy is that they believe people should pay tax somewhere".

In order to tax Vodafone-type deals, Mukherjee in his 2012-13 Budget proposed to amend the Income Tax Act with retrospective effect, a move that evoked sharp reaction from industry.

He further said that the intention of the Indian government is to bring into the net those companies that take advantage of treaties and tax havens to avoid payment of taxes.

In order to strengthen the provision to tax overseas companies, the government has also introduced General Anti-Avoidance Rules (GAAR) in the Finance Bill 2012, which has created concerns among the foreign investors leading to uncertainty in the stock markets.  Responding to queries on the global economic situation, Zoellick said that the crisis in the Middle East, which has pushed up oil prices, is likely to continue.

"The increase in oil price has certain risk factor on the world economy. This is significantly driven by political and security uncertainties in the Gulf...All countries will have to be aware that the problem is not going to go away so soon," he said.