For India to become an attractive destination for doing business, it is important to scrap retrospective taxation which acts as a “significant disincentive” for entities planning to undertake business in India, a panel headed by former Securities and Exchange Board of India chairman M Damodaran has suggested.

According to a report in The Hindu, the panel, comprising business leaders of both public and private sector companies in addition to officials from various ministries, has recommended a slew of legal, administrative and regulatory reforms that could enhance the ease of doing business in the country.

Apart from simpler and clearer drafting of rules, the panel has recommended greater independence to regulators, transparency in selecting their heads, incentives for states undertaking key reforms and quicker resolution of disputes through the existing arbitration mechanism. The report has been submitted to the ministry of corporate affairs.

The committee report pointed that “death and taxes are equally undesirable aspects of human life”, but even death is “never retrospective”.

“Retrospective taxation has the undesirable effect of creating major uncertainties in the business environment and constituting a significant disincentive for persons wishing to do business in India. While the legal powers of a government extend to giving retrospective effect to taxation proposals, it might not pass the test of certainty and continuity,” the report said.

The retrospective amendment that was made to taxation laws became a major issue as most multinational companies and foreign governments expressed their displeasure over the move. The amendment, which was made after the supreme court rejected the government’s tax demand from UK-based global telecom major Vodafone, had made foreign companies averse to investing in India.

Last year in August, the Damodaran committee was set up to submit its recommendations on improving the domestic business environment after the World Bank ranked India a poor 132nd  out of 183 countries on the ease of doing business parameter. It has made 20 recommendations classified in five broad categories including— legal reforms, regulatory architecture, boosting efficacy of regulatory process, enabling MSMEs, and addressing state level issues.