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Indian Tax Proposals Present Risk for Foreign Companies

Doing business internationally can present risks.

The developing economy and growing middle class in India have made it an attractive option for foreign investment, but it seems that some of the country's new policies and taxes are not making it easy for multinational corporations to expand in the region, The Wall Street Journal reports.

According to the source, many companies that have already tried to make inroads have had to deal with the risk of doing business there and new tax proposals that could establish "significant retroactive tax liabilities for international mergers" dating back 50 years. 

Corruption has always been a factor in doing business in India, but businesses used to justify the troubles with the hopes that their investments would eventually pay off, the newspaper notes. The court system once stood as a tool in foreign corporations' arsenal, yet the Journal points out that the government's effort to override a court decision on Vodafone Group's tax liability could end that trend.

FirstPost writes that the government's actions make it seem as if it is "trying hard to shoot itself in the foot. Faced with a yawning fiscal deficit and a current account deficit, the government is not doing itself any favor by trying to scare away foreign capital."