Skip to main content

Higher taxes spark panic among FPIs

By
Higher taxes spark panic among FPIs
The government’s decision to reintroduce the long-term capital gains (LTCG) tax has spooked foreign portfolio investors (FPIs), who rushed to the finance ministry on Friday to seek relief. Sources said FPIs were concerned about the escalation in the costs for investing in India vis-àvis other Asian and emerging markets (EM). Overseas investors were also worried whether the ‘grandfathering’ relief would be extended to them.
While news about the LTCG tax has been doing the rounds for a while, FPIs were hopeful of status quo on the tax benefit on shares held for the longer term. At the most, foreign funds had braced for an increase in the time period from one year to two years or three years for availing of the LTCG exemption.
Most foreign funds are peeved over the reintroduction of the tax without the abolition of the securities transactional tax (STT). In 2004, the STT was introduced as a substitute for the LTCG tax. In the Union Budget on Thursday, Finance Minister Arun Jaitley proposed to charge the LTCG tax without any change to the STT regime, making India the only market to levy both.
“The imposition of the LTCG tax is the real negative from the Budget. It is wrong to assume that its imposition does not affect investors,” said Samir Arora, founder, Helios Capital, adding that India could lose out to other markets as investors would have to temper down their net returns. In the recent past, overseas investors had asked for an increase in the STT instead of imposing the LTCG tax, which creates administrative and compliance difficulties for FPIs, which are poolinvestment vehicles like domestic mutual funds.
“The introduction of a tax on LTCG will be a deterrent for foreign investors and could potentially result in a movement of trading activity away from India to other offshore jurisdictions such as Singapore, which offer better tax rates and sophisticated financial products,” said Nishith Desai, founder of Nishith Desai Associates.
The Business Standard, New Delhi, 03rd February 2018

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more