Vodafone has lost ~$2bn tax case, as Bombay HC has rejected it’s petition against the show-cause notice of the income tax (I-T) department seeking about $1.7 billion as capital gains tax (from Hutchison-Essar stake).
If Vodafone loses the case in the SC, it will have to shell out $1.7 billion as tax liability, a penalty of an equal amount and a tax on both sums at 18% per annum. The total outgo for Vodafone could exceed $4 billion.
This case will set the benchmark for cross-border deal and if Vodafone loses the court in SC, it might wrong send signals to the international business community.
Why ‘wrong signal’? It will send a damn good signal. If they want to do business in this land, they ought to be compliant with the law of the land. Just because the liability is huge does not give a swanky foreign brand a license to cry fowl over whatever they want!!
Totally agree with Rajesh, if Vodafone are liable for a tax pay, let them, after all its business
What kind of Wrong Signal are you talking about? If the same multi-national companies goes to China, they comply with Chinese rules and do business there. They do not ask for exceptions in China. Chinese policies are pro-Chinese because it is the country of Chinese people. Not even international IP laws are applicable there. BMW’s and Audi’s are copied. Even then Chinese attract much more FDI than India. All kind of exemptions and exceptions are asked and provided only in India for starting business and for running them as well. Why the country belong to the people of India should be pro-western?
Secondly, the IT department is not asking for any fee or duty that has to be paid out of Vodafone’s capital. It is asking for TAX on the money Vodafone MADE in this very land. Pay a part of money they have earned here. What is wrong with that?
Just imagine what this money could mean if it can be used for providing better equipments to our security forces !!
Lets understand the fact that government makes money from taxes and then spends it on these various equipments and personnel.
I am not a tax expert, i do not know what the details of the case are and i have nothing against foreign brands. But i think it should be pursued vigorously by the I.T. Department.
The issue here is that Indian laws aren’t clear – its not yet clear whether Vodafone is considered as an ‘agency’ post-Hutch acquisition.
And when the laws arent clear, its quite imperative that I-T dept will go after all those cos. who fall under the same context.
For a MNC eyeing M&A in India, these issues are important and if Vodafone loses the case, many cos. will surely give up the idea.
Yes, surely will…
Provided.
Profit from deal < M&A liability/Expenses.
Regards,
Ashish A