The government gave a patient hearing to the suggestions coming from foreign portfolio investors (FPIs) on the new tax proposed in the Budget but is yet to take a call on either revoking or minimising the impact of the new surcharge that has already seen investors taking out over Rs 22,000 crore since July 5.
The finance ministry had called a meeting with FPIs and domestic institutional investors on Friday to hear their concerns about some of the recent changes in taxation for overseas investors. Representatives of the FPIs met the Finance Minister and secretaries in North Block.
Participants comprising all major foreign institutions investors were, however, left high and dry with finance ministry officials giving no comments on their suggestions but heard everyone on each point they raised.
There was speculation that the government might come with some decision on Friday itself as a confidence building measure. Reports of tax withdrawal have already pushed up the Sensex by over 900 points in the two-day session.
In the meeting, FPIs sought tax stability from the Finance Minister to be able to invest and stay invested in India while seeking rollback of the tax surcharge on them.
Nandita Parkar, President, AMRI (Association of Asset Management Roundtable of India) an association of FPIs, said "We talked about taxation, ease of doing business. We told them that India can attract 25-35 billion-dollar investment just in equity FPI flows and in order to do that to let that happen one of the conditions is a stable tax regime which is very important so that the tax does not act as a hurdle and tax needs to be predictable for investment. So that was a big issue which we discussed."
She said quick fixes are needed for revival of stock in India.
"We made a presentation to the five secretaries and the finance minister. I feel our suggestions were listened to very very carefully."
Asked if she hopes the government will roll back the FPI tax, she said "I am just hoping".
She told IANS that if the FPI tax is allowed to continue it would do a lot of damage to the investments in India by the FPIs.
Parker also said that "We brought the roll back of long-term capital gains tax issue also with the ministry as most countries don't have it."
The FPI association chief also said "Apart from tax surcharge and LTCG issues, we also brought forth ease of investing in India. We told them there is need for stable tax regime for the next five years. The fear of prosecution is holding back investors," Parker stressed.
Another FPI on condition of anonymity said "We want a stable tax regime, some trust building efforts from government."
Speaking on the discussions with the Finance Minister, a participant said since everybody (FPIs) is not structured on the same lines (as trusts or association of persons who are affected by the surcharge) so obviously the demands were not unanimous in seeking a rollback on the tax surcharge.
All participants said the government had no comment to make after the suggestions which they keenly heard but all the FPIs were unanimous in saying the fact that they were calling even after the Budget has been passed itself was a positive reaction from from their side. But what happens next depends on the government.
Leading overseas investors including Goldman Sachs, Nomura, Standard Chartered, Barclays and a host of FPIs met finance ministry officials and the minister on Friday as the government seeks to ease concerns over dwindling foreign portfolio inflows after a Budget move to increase tax surcharge on them, said three people familiar with the matter.
The meeting comes in the wake of growing concerns among FPIs over the increased tax surcharge on trusts and association of persons, a move that has been a key trigger for outflows of over Rs 22,000 crore since July.
The government had increased the tax surcharge on all the non-corporate entities which earn over Rs two crore in income annually. About 40 per cent of the FPIs would be impacted by this tax hike.
(Anjana Das can be reached at firstname.lastname@example.org)