'Global cos may hesitate to invest in India due to tax issues'

NEW DELHI: At a time when the government is looking to attract more foreign investment, global consultancy firm Ernst & Young has said global companies might hesitate to make investments in India, especially since tax controversies take a longer time to get resolved.

In a new report, E&Y has also said that 70 per cent of the international tax controversies in the country are transfer pricing disputes.

"Global companies clearly wish to do more business in India, but as a rule, they may hesitate to invest in a market where guidance is limited and where significant tax controversies are not resolved in a reasonable length of time," it noted.

Stressing that a global approach is necessary to manage tax risk and controversy, E&Y said indirect taxes would become more contentious and important.

"Any realistic corporate effort to reduce tax controversy requires a well organised pre-controversy strategy, in both direct and indirect taxes," E&Y Partner and National Leader ( Policy Advisory Group) Ganesh Raj said.

Tax risk management requires corporates to stay closely connected with tax policy, legislative and tax administration changes, he added.

E&Y's 'Global Tax Policy & Controversy' report pointed out that indirect taxes account for about 75 per cent of all taxes imposed on global businesses.

"India and China have both continued to increase their overall levels of enforcement in the area of indirect asset disposals," it added.