Sunday, January 6, 2013

India revives tax on Vodafone

The headline reads "Government revives Rs 14,000 crore tax demand on Vodafone; company may go for arbitration." Crore = $10 million, so that's 140 billion rupees, which converts to about USD $2.6 billion, up a bit from the original $2.5 billion sought by India's tax authority last year, to account for "delayed payment".

The report says "The company could initiate arbitration before international tribunals under the India-Netherlands Bilateral Investment Protection Agreement"--but this was already done early last year, in anticipation of the reassertion of the tax.  In connection with its filing, Vodafone stated:
"The dispute arises from the retrospective tax legislation proposed by the Indian government which, if enacted, would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone."
I wondered at the time about the oddity that Vodafone could draw India into a dispute resolution with the Netherlands in respect of a law that is not yet passed, but noted that apparently once invoked, the BIT automatically provides for dispute resolution.

The latest is merely an assertion by the Indian tax authority, so it remains to be seen whether Vodafone will seek another victory from the Indian courts (challenging the reassessment) or from the BIT (challenging the retroactive law as a breach of fair & equitable treatment to foreign investors).

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