ICC and BIAC react to retroactivity measures in India

  • 23 April 2012

Global business is concerned about recent developments in tax legislation in India, where retroactivity is adding a strongly negative connotation to the investment climate.

ICC has written, together with the Business and Industry Advisory Committee (BIAC) to the Organisation for Economic Co-operation and Development (OECD), to the Finance Minister of India to advise the government about the effect of its new and retroactive law.

ICC expects to start a dialogue with the Indian government to address the concerns underlying this development.
Changing laws with retroactive effect is bad for business everywhere as it makes the return on investment speculative. Consequently, investors will rate countries with no such risk as more attractive. For that reason, many countries forbid retroactive application of new rules and laws.

It is now uncertain that such retroactivity will also not be applied to laws outside the tax framework that are perhaps even more crucial to the success of an investment in India.

This conflict, with a globally held principle not to have retroactivity, will have a significant impact on investors into and out of India.