1. A Passage to India! Nikhil V. Mehta, Barrister and Advocate Rendezvous Room Taj Mahal Tower 14 th October 2014

2. A Brief Fiscal History 1973: Exchange controls tightened by diluting foreign equity to 40% max The continuing rise of the black economy: avoidance unnecessary 1991: Liberalisation introduced 2009 onwards: the Vodafone saga 2009: Direct Taxes Code Bill introduced (still a draft) 2012: Retrospective legislation enacted 2012: White Paper on Black Money GAAR, but postponed to 1/4/2015 2014: New BJP Government with overwhelming majority

3. Tax Avoidance and Tax Evasion Background in tackling tax evasion has influenced India’s approach to tax avoidance Distinction blurred Same tax officials involved in both Courts have been the protectors of legitimate tax avoidance through development of a judicial doctrine based on English law from the Duke of Westminster’s Case

4. Lawmakers and Guardians Finance Ministry wants to attract foreign investment, but still responsible for raising revenue Tax authorities want to raise the tax take The Courts want to apply the rule of law

5. Tax Behavioural Changes An urgent need for clarity and consistency What is the message for foreign investors? Scaling back of aggression Distinguish avoidance and evasion Better advance ruling mechanisms Of course, taxpayers need to behave too!

6. Conclusions If the GAAR is introduced next year, that will be a real test of the tax administration, as they will need to exercise their new powers judiciously. Possible that new Government will postpone it. Next critical step will be the first full Budget of the new Government in February 2015. Golden opportunity to steady the fiscal ship.