Huge U.S. regulation packages draw institute scrutiny; India urged to withdraw retroactive budget proposals.

"The Institute's technical committees had a busy--and productive--winter and early spring in 2012," TEI President David M. Penney recently observed. "The Internal Revenue Service released two huge sets of regulations, which our committees were called upon to analyze in very short order." The guidance for the deduction of expenditures relating to tangible property--the so-called tangibles regulations--runs more than 300 pages, including the transitional guidance. The proposed regulations to implement the Foreign Account Taxpayer Compliance Act (FATCA) were similarly substantial in length, depth and breadth. "In both cases, the committees provided substantive--and substantial--contributions to U.S. tax administration," Mr. Penney said. "We hope the government recognizes there is still much to do and give the submissions the full consideration they deserve."

In another significant development, the International Tax, Canadian Income Tax, Asia Tax, and European Direct Tax Committees collaborated on a brief but important letter to the Prime Minister of India. TEI objected to a proposal in India's 2012 Finance Bill overturning the Vodafone decision by retroactively amending various provisions of the Indian tax code.

TEI Objects to India's Retroactive Budget Legislation

In an April 6, 2012, letter to senior Indian government officials, TEI President David M. Penney expressed the Institute's concern about the government's proposal to overturn the Indian Supreme Court's Vodafone decision by retroactively amending the tax to 1962. "For a tax system to be fair and perceived as being fair," Mr. Penney said, "taxpayers must be able to rely on the law in effect when business transactions take place, expenditures are incurred, and other taxable events occur. Except in extreme circumstances, tax legislation should be prospective."

Acknowledging that there may be exigent circumstances where a government can exercise its authority to change the tax laws retroactively, Mr. Penney cautioned that "this power should be exercised with restraint." That restraint, Mr. Penney added, is missing from India's Finance Bill 2012. Reversing the outcome of decided cases on a retroactive basis, the Institute's letter asserts, exacerbates the uncertainty faced by businesses operating in India. Indeed, TEI asked, "Why would a taxpayer challenge an adverse decision of the taxing authorities if it cannot be assured that a successful judicial decision will stand?"

TEI urged the...