The Indian finance minister Pranab Mukherjee has made it clear his government will not reconsider its position to clamp down on corporate tax deals amid controversy about a five-year dispute over UK telecom giant Vodafone, media reports said.

The Indian finance minister Pranab Mukherjee has made it clear his government will not reconsider its position to clamp down on corporate tax deals amid controversy about a five-year dispute over UK telecom giant Vodafone, media reports said. Meanwhile, a new report says international offshore wealth holdings remained unchanged from before the financial crisis.

“There cannot be a situation that somebody will make money on an asset located in India and will not pay tax either in India or to the country of its origin,” Mukherjee is reported to have said in his reply during the Finance Bill debate. The bill was passed by a voice vote.

Vodafone had in January won a tax battle after India’s Supreme Court ruled it was not liable to pay any taxes under prevailing laws. The finance ministry then proposed in the budget to impose a retrospective provision for tax on some types of international mergers. The government expects to collect Rs35,000-40,000 crore by taxing older corporate deals.

“We are not in that desperate a situation that a country of 120 crore people will be treated as a tax haven like Cayman Islands, Isle of Man or Virgin Island,” Mukherjee said. On the court’s verdict, he said: “The Supreme Court may interpret law, but Parliament equally has the legislative right to express its intention by making amendment to correct the judgment.”

The UK and US have cautioned that the tax proposal could dent India’s image as an investment hotspot.

Offshore money

The report came as the focus on the amount of money allegedly held in so-called tax havens was intensified by industry data, the UK’s Guardian newspaper reported. The amount of money deposited offshore, $2.7 trillion, is unchanged from $2007, the publication said, citing data from the Bank of International Settlements.

Niels Johannesen and Gabriel Zucman, academics who were granted access to a rarely seen breakdown of BIS data, were quoted as saying that efforts by Group of 20 nations to reduce outflows of money to offshore centres have “largely failed”.

Such data can be controversial, as the very fact that money might be stashed away without disclosure means statistics are estimates, a problem also seen when trying to measure the “underground” or “black market” in some countries.

Defenders of offshore centres argue that standards of disclosure and reporting have improved significantly over the past decade and that many people use such centres for reasons of convenience rather than to evade tax. Also, organisations such as the Washington DC-based Cato Institute think tank argue that low-tax jurisdictions put pressure on other regimes to keep taxes lower than would otherwise be the case.