No tax on overseas capital inflows, says PM

ON BOARD AIR INDIA ONE - In what should be music to the ears of foreign funds, Prime Minister Manmohan Singh Tuesday ruled out tax on capital flows from overseas, saying a situation for that had not arisen.

Called the Tobin Tax, named after Nobel laureate James Tobin, such a levy seeks to discourage capital flows, especially from speculators, that has a destabilising effect on the domestic financial system.

“I think capital inflows into our country, both by way of direct investment and by way of portfolio investment, have been at reasonable levels,” the prime minister said.

“Tobin Tax has merit in particular situations but as far as India is concerned we have not reached a stage where capital flows have become a problem,” he told an on-board press conference on his return from the Toronto G20 Summit.

“We don’t face situations of the kind now which would require an imposition of Tobin Tax.”

While Brazil already imposes a 2 percent Tobin Tax, the matter also been under discussion both at the G20 and at the domestic level at the Reserve Bank of India.

During the press conference, the prime minister also ruled out any legislation to make it compulsory for corporate houses, especially those implementing state collaborative projects, to provide social services.

“I think good corporate houses are looking at what they can do in the non traditional key in providing social services, education, health facilities for their employees.

“I think that it’s a corporate responsibility which has to be shouldered by the corporate sector on its own. We are not contemplating any legislation in that area,” he said.

(Arvind Padmanabhan can be contacted at arvind.p@ians.in)