"In the Vodafone case, the Supreme Court has again made a wrong call on tax avoidance, setting a precedent that jeopardises thousands of crores of potential revenue for the exchequer."
The Hindu : Opinion / Lead : Capital gains, everyone else loses: Tax avoidance through artificial devices — holding companies, subsidiaries, treaty shopping and selling valuable properties indirectly by entering into a maze of framework agreements — has become a very lucrative industry today. A large part of the income of the ‘Big 5' accountancy and consultancy firms derives from tax avoidance schemes which flourish in the name of tax planning.
Many foreign institutional investors (FII) avoided paying taxes citing the Double Taxation Treaty with Mauritius. This treaty says a company will be taxed only in the country where it is domiciled. All these FIIs, though based in other countries and operating exclusively in India, claimed Mauritian domicile by virtue of being registered there under the Mauritius Offshore Business Activities Act (MOBA). Since there was no capital gains tax in Mauritius, most FIIs and most of the foreign investment in India, by 2000, came to be routed through Mauritius.
High Court rejected Vodafone's contention that the transaction with Hutchinson was not liable to tax. But in appeal, a Supreme Court bench headed by Chief Justice accepted Vodafone's claim. With such welcoming winks towards tax avoidance devices, it is unlikely that any foreign company would be called upon to pay tax or at least capital gains tax in future in India. Thousands of crores of tax revenue, and the future attitude of the courts towards innovative tax avoidance devices, will be shaped by these two judgments.
Our courts must send a clear signal that India is not a banana republic where foreign companies can be invited to loot our resources and even avoid paying taxes on their windfall gains from the sale of those resources.
The Hindu : Opinion / Lead : Capital gains, everyone else loses: Tax avoidance through artificial devices — holding companies, subsidiaries, treaty shopping and selling valuable properties indirectly by entering into a maze of framework agreements — has become a very lucrative industry today. A large part of the income of the ‘Big 5' accountancy and consultancy firms derives from tax avoidance schemes which flourish in the name of tax planning.
Many foreign institutional investors (FII) avoided paying taxes citing the Double Taxation Treaty with Mauritius. This treaty says a company will be taxed only in the country where it is domiciled. All these FIIs, though based in other countries and operating exclusively in India, claimed Mauritian domicile by virtue of being registered there under the Mauritius Offshore Business Activities Act (MOBA). Since there was no capital gains tax in Mauritius, most FIIs and most of the foreign investment in India, by 2000, came to be routed through Mauritius.
High Court rejected Vodafone's contention that the transaction with Hutchinson was not liable to tax. But in appeal, a Supreme Court bench headed by Chief Justice accepted Vodafone's claim. With such welcoming winks towards tax avoidance devices, it is unlikely that any foreign company would be called upon to pay tax or at least capital gains tax in future in India. Thousands of crores of tax revenue, and the future attitude of the courts towards innovative tax avoidance devices, will be shaped by these two judgments.
Our courts must send a clear signal that India is not a banana republic where foreign companies can be invited to loot our resources and even avoid paying taxes on their windfall gains from the sale of those resources.
No comments:
Post a Comment
To check spam, comments on older posts are moderated, so expect some delay before your comments are published