Saturday, March 17, 2012
Vodafone vs the GOI
The Vodafone affair is now a much debated one. There are many who want to see the 'foreigner' paying his due on a massive chunk. And there are those who think that the government is being foolish in its pursuit that will only deter new investments. I am totally opposed to this 'retrospective' announcement that the GOI is talking about. Hopefully, the Supreme Court will knock it down. What is the sanctity of a commercial deal, if you have the threat of post facto governmental action at a distant point in the future? Is the move of government a well thought out one or is it one more weapon in the armoury of certain politicians to get at some targets? Intriguing. The Vodafone case is funny indeed. Vodafone did not make any money. They bought the business from Hutchison Essar combine. So, if anything, money is made by Hutch/Essar. According to the government, Vodafone is guilty of not deducting tax at source on the payment they made to Hutch/Essar. Now, did the government even try to ask for money from Hutch/Essar who actually sold the business and made their money? Apparently, the government feels that it has no hold on Hutch and so cannot pursue Hutch. Vodafone is an easy target because they have business interests in India which can be put at risk by the government of India. To me the issue is not one of losing out tax revenues. It is a question of how legislation ought to be drafted and what is the comfort that even an Indian can have in his own government. And what about Essar, which should also have made some money from the sales? Has the government approached them for collecting any money? I have no idea, Sir. The government also had a requirement that any tax payer can be asked by the tax authorities to revisit his records for the past eight years. Now, they have increased it to sixteen years!! So much more business for document storage companies and so much more avenues for pre emptive bribe collection .