I wish the Government of India gives up its decades of vain pursuit in this issue. The imposition of this tax bill turned the perception of international investors towards India from good to bad overnight. Unfortunately, even after 13 long years, this dark cloud hangs over India & hurting investor sentiments.
//Vodafone Group Plc has won an international arbitration in The Hague against the Indian Government in a $2 billion tax dispute//
Leaving the legal details & technical validity aside (where I am no expert), the underlying premises on this tax bill was weak:
- It was a retrospective law passed by Parliament to impose a tax on a transaction that happened years earlier. This created uncertainty in the minds of anyone doing business in India.
- The transaction happened between two parties abroad (Hutchinson and Vodafone) and not in India. But Government of India made a claim of the underlying assets being in India, so they had the jurisdiction.
In 2013, I have written a blog post on why “Doing business in India” has become difficult with Indian Tax Departments becoming litigatory, and I had written about how this issue was a textbook example of the problem .
[Update: 6th August 2021]
I welcome this. Finally, after a decade Government of India decides to repeal the ill-thought, investor scary, business-unfriendly retrospective tax law. I have written about this in the past, any tax law that is back-dated (retrospective) is unfair and helps only the bureaucracy and the lawyers – I doubt how much of actual revenue they generate for the treasury. To conduct the cases against Vodafone and Cairns around the world, due to this law, I am sure millions of Dollars would’ve been spent by the exchequer.
// Govt nullifies retro tax; introduces Bill to amend Income Tax Act //