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Indian Expert Committee Report Recommends Quashing Retrospective Tax Law Changes
Published on:
A report for India's Finance Ministry into the government's retrospective tax law changes could see Vodafone relieved of its $2.2 billion tax demand after it recommended that such changes should be reserved for "exceptional or rarest of rare cases".
In addition, the report said that retrospective application of a tax law should occur only after exhaustive and transparent consultations with stakeholders who would be affected.
The Indian government alarmed investors earlier this year when it changed the tax law -- and made it applicable to previous transactions dating all the way back to 1962 -- seemingly simply to go after Vodafone which had just won a lengthy court case against the tax demand.
As the law has been changed, Vodafone has said that it may now need to set aside provisions in its accounts to cover the tax demand if it is formally made by the Income Tax Department.
However, the Draft Report written by an Expert Committee could lead open the option for the government to impose a tax demand on Hutchison Whampoa, which sold its stake to Vodafone. Currently, the tax laws require that the buyer pay the tax, not the seller.
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