GAAR proposal disappointing, says Jim Rogers

NEW DELHI: Stating that bureacracy in India is the worst in the world, Jim Rogers, Chairman, Rogers Holdings told ET Now that he was disappointed with the General Anti-Avoidance Rules (GAAR) proposal announced by Finance Minister Pranab Mukherjee in the Union Budget 2012-13.

Rogers is of the opinion that these regulations will discourage global investors. "I would prefer other markets than India if GAAR is implemented," he told ET Now. Rogers believes that India would develop faster if the markets are less regulated. 

Rogers maintains his view on commodities and expects oil to rise in the future. 

Finance Minister Pranab Mukherjee on Tuesday evening said he may modify some provisions of the GAAR prescribed in this year's budget, holding out hope that the government could adopt a lenient position on the issue of taxing short-term capital gains of Mauritius-based foreign institutional investors (FIIs).  

Earlier on Tuesday, finance ministry mandarins said the government had no intention of targeting participatory note (PN) trades, triggering a 205-point rise in the 30-share BSE Sensex. But experts said uncertainty will remain till an amendment is passed to specifically exclude PNs from the ambit of the relevant section of the income-tax law. 

The budget has spooked investors on two fronts. First, GAAR gives the tax authorities, among other things, the power to override the tax avoidance treaty between India and Mauritius to tax FIIs that invest through special purpose vehicles without setting up an office or permanent establishment in the tax haven. 

A finance ministry official said the government did not have participatory notes in mind when it introduced a provision in the budget that makes it clear that deals involving Indian assets, such as Vodafone's acquisition of Hutchison Essar, will be subject to tax even if the transactions are struck overseas between foreign entities. 

A panel has been formed which will formulate procedures and also specify threshold for transactions," said the official.