Share valuation: Foreign investors step into taxing times

Developments in the Indian tax landscape over the last couple of years are sure to leave anyone confused. While the Vodafone ruling brought cheer to investors, the subsequent retrospective amendment and tax authorities’ insistence on recovering demand created a huge furore. However, the Shome Committee’s report and assurances by the Prime Minister and Finance Minister signalled steps towards restoring investor confidence.Another measure was the introduction of the Advance Pricing Agreement (APA) regime for transfer pricing issues. The tax authorities’ positive and open approach vis-à-vis APAs has encouraged taxpayers to explore this route. However, there follows a reality check, challenging the optimistic outlook towards tax policy and the general investment climate.