Damodaran panel report

A committee headed by former Sebi chairman M Damodaran has recommended scrapping of 'retrospective taxation' as a chief measure to make India an attractive destination to do business.
The committee, which had leaders of corporates and state-owned companies and officials of various ministries among its members, also recommended a system of advance ruling for all organisations tasked with framing regulations, encouraging arbitration to resolve contractual disputes and setting up of an overarching body to enable policy and process coordination of medium and small scale enterprises (MSMEs).
The 76 page-long recommendations titled 'Reforming the Regulatory Environment for doing Business in India' is currently under the study of the ministry of corporate affairs.
The report singled out retrospective taxation as a big obstacle to attracting investment. "Retrospective taxation has the undesirable effect of creating major uncertainties...constituting a significant disincentive for persons wishing to do business in India," the committee remarked. Last year, following the Supreme Court's verdict that British telecom major Vodafone was not liable to pay taxes to the Indian government on overseas transfer of Indian assets, the government had amended the tax laws with retrospective effect, bringing Vodafone's deal under its net. The amendment had caused a huge uproar in the international investor community. The Damodaran committee in its report noted that even though the legal powers of the government extend to giving retrospective effect to taxation proposals, it might not pass the test of certainty and continuity.
The ministry of corporate affairs had set up the committee to suggest ways to improve India's dismally low ranking on the World Bank's index ranking countries on the 10 parameters measuring ease of doing business. In the report, India had been ranked at 132 out of 183 countries, lower than its neighbours Bangladesh, Sri Lanka and Nepal.
Further the committee has lashed out at the orientation of debates to the backgrounds and personalities of regulators. It also slammed the practice of conducting interview-based selections of regulators by a panel. According to the committee such sterile debates didn’t help in understanding the organisation’s regulatory philosophy, which significantly influenced the content and scope of regulations. The committee recommended a transparent mechanism to appoint a watchdog. It recommended a system in which the head of a regulatory organisation and his board-level colleagues appeared before an appropriate parliamentary committee once every six months to report on various developments and discuss the broad plan of action for the next six months. The committee said the practice of inviting applications from interested candidates and asking them to appear for interviews by a panel comprising persons unfamiliar with the regulatory organisation led to loss of public confidence, not only in the process but also in the organisation.
It added the genuine functional autonomy of regulators would have to be reinforced with financial autonomy by putting in place a system in which regulatory organisations weren’t dependent on government departments for financial support.
The panel also suggested each regulatory organisation undertake self-evaluation once in three years and put the conclusions in the public domain. It recommended each government organisation or department responsible for framing regulations undertake a two-stage process of consultation, through which a revised draft was put up after the first round of stakeholder consultations. Typically, just one draft is put in the public domain for inviting suggestions.