Vodafone vs. India

India has been increasingly visible in international tax policy, both in terms of openly challenging the appropriateness of the existing soft law regime jealously guarded by the OECD and in terms of taking its own approach to things like transfer pricing and revenue safeguards.  Vodafone recently won a big case involving withholding capital gains taxes when it used a Dutch vehicle (with shares in an Indian company) to buy shares in a Cayman company.  India wanted $2.5 billion in capital gains taxes on the grounds that the purchase was set up offshore merely to avoid Indian tax liability.   The court disagreed, and it seems India responded by proposing new rules on cross-border transactions that it would retroactively apply to Vodafone.  Retroactivity in tax law is of course controversial, but the Indian SUpreme COurt has apparently held up prior retroactive amendment cases, so it's no surprise that Vodafone will likely fight it:

A Vodafone statement called India's proposal to change its tax law on mergers with retrospective effect "grossly unjust," and said the move seeks to apply tax liabilities "which explicitly were not countenanced under Indian law in force at the time" when the company bought an about 67% stake in the Indian operations of Hutchison Whampoa Ltd. for $11.2 billion.

Will be interesting to see how this comes out.