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| Edited By: |Source: DNA |Updated: Sep 12, 2017, 07:55 AM IST
Shadows of the decade-old Vodafone-Hutchison tax case still continue to pull down India's rank on 'Ease of doing business'. The mega deal is done and dusted, but the tax demand is hanging like the Sword of Damocles. Even PM Narendra Modi, who accused the previous government of tax terrorism, did precious little to put an end to their ordeal.
Way back in 2007, Hutchison sold its mobile-phone business in India to Vodafone for about $11 billion when the British giant bought a Cayman Islands-based investment firm that controlled, through other offshore entities, 67% stake in Hutchison Essar Ltd. The government wanted to tax Hutchison's windfall profit, but the Supreme Court had held against the move since the transaction was entirely offshore. However, in 2012, India changed the tax code retrospectively, giving itself the right to impose a levy in cases of indirect transfer of assets.
Vodafone, which is in the process of merging its India operations with rival Idea Cellular, is all set to bid adieu to the country. But, that has not deterred the government from raising tax demands. Cairn Energy Plc is fighting a similar retrospective tax bill in India. The income-tax department demanded all dividends due to Cairn Energy Plc from Cairn India against part of the Rs 10,247-crore tax levied on the British company.
With such misadventures, India is unlikely to make any headway in improving the World Bank's ease-of-doing business survey from the current rank of 130 (in 2016), as big companies struggle with the government's unreasonable tax demands. Foreign companies in India continue to call such tax demands by the same name - 'tax terrorism'.
