Not only government, MNCs too responsible for tax rows: Raghuram Rajan

Blaming multinational corporations squarely for tax controversies, Reserve Bank Governor Raghuram Rajan said their indulgence in avoidance and evasion results in prolonged legal battles, according to the PTI report.

Addressing the issue of tax havens, Rajan wondered aloud as to what makes a bulk of intellectual property reside in Cayman Islands, quipping that no one has seen scientists in so large numbers in the Caribbean isles.

"Occasionally, there is government excess, but they are not the only ones who commit excesses," he said, delivering the 13th Nani Palkhivala lecture on 'Strengthening the free enterprise in India'.

"Multinational corporations complain all the time of excessive demand about excessive taxation, but it is also true that MNCs across the world tend to find tax avoidance and sometimes tax evasion as an appropriate technique and therefore, there is a constant fight between governments and MNCs," he said.

In remarks that come within a week of Prime Minister Narendra Modi assuring all retrospective taxation such as the infamous Vodafone case being an issue of the past, Rajan said the movement on taxation within the country has been "positive and in right direction".

"The movement has been positive and in right direction, including the great debate on retrospective taxation which has allowed us to clarify our thinking on this issue and the government has stated its position very clearly on the way forward."

The academic-turned central banker said he hopes that the Bankruptcy Code gets passed in the upcoming Budget session of Parliament. The code will help facilitate credit for both large enterprises as well as smaller ones which have suffered the most under laws like the Sarfaesi Act.

"It would make it much easier for the smaller firm to get credit and also allow the large firm to get credit because now there is a way for the lenders to recover the money in the Bankruptcy Code," he said.

Rajan said the government is also working on a plan to have unique IDs for businesses on the lines of the ambitious Aadhar programme for individuals, which will help establish credit histories and make it easier for the better-behaved firms access credit.