This content is from: India

Shome on appropriateness of retrospective approach to tax policy

Parthasarathi Shome, minister of state to the Indian finance minister, has said there are instances where retrospective approaches, by tax authorities, are inappropriate. He was speaking at an international tax conference at the Confederation of Swedish Enterprise last week.

The minister was asked by Barbara Angus, of Ernst & Young in Washington, whether he thought there are instances when retrospective approaches are appropriate.

Shome replied that in instances where new evidence comes to light, a retrospective approach would be a useful tool, especially going back up to 10 years and in particular with regard to exchange of information.

Shome chaired an expert committee in 2012 which determined that retrospective application of Indian tax law should only take place in exceptional or the ‘rarest of rare’ cases. This followed the government’s insertion of retrospective amendments in last year’s Finance Bill.

The minister also said in Sweden that retrospective approaches may be able to help in some cases that cannot be solved simply with rules and ordinance.

However, he added that authorities should not try to apply retrospection in rulings by the Supreme Court and other precedents set by the judiciary if it would create a fundamental change.

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