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Business News/ Politics / Policy/  UK asks India to facilitate early resolution of long pending tax disputes
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UK asks India to facilitate early resolution of long pending tax disputes

The Vodafone tax demand, which was initially around Rs8,000 crore, has now more than doubled to Rs20,000 crore with interest and penalty

The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar Ltd, now known as Vodafone India Ltd. Photo: ReutersPremium
The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar Ltd, now known as Vodafone India Ltd. Photo: Reuters

New Delhi: Britain on Monday asked India to facilitate early resolution of long pending tax disputes like Vodafone Plc, Cairn Energy Plc through the ongoing arbitration process.

UK International trade secretary Liam Fox who is visiting India as part of the delegation of UK Prime Minister Theresa May made the request to trade minister Nirmala Sitharaman during the Joint Economic and Trade Committee (JETCO).

Sitharaman said she assured that the government will not resort to retrospective taxation but added that it cannot do much in ongoing arbitration cases. “He requested that at least in the Vodafone case, India should expedite the arbitration process or at least should not delay it to bring it to a closure. I assured them that I will pass the message on to the finance ministry," Sitharaman said.

The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar Ltd, now known as Vodafone India Ltd. The tax demand, which was initially around Rs8,000 crore, has now more than doubled to Rs20,000 crore with interest and penalty.

Though the Supreme Court ruled in favour of Vodafone in the tax case, the government of the day in 2012 brought in a retrospective amendment to tax laws, bringing such transactions under the tax net. This prompted Vodafone to launch international arbitration proceedings.

The Cairn tax demand is on account of the alleged capital gains arising from a 2007 deal in the hands of Cairn UK Holdings, the erstwhile parent of Cairn India. That was the year Cairn Energy restructured its Indian subsidiaries ahead of an initial public offering. Cairn India, too, has been served a tax notice, a dispute over which is pending in the Delhi high court.

The Rs28,000-crore tax demand comprises Rs10,247 crore of principal tax and the remaining amount as interest. Cairn Energy has also initiated international arbitration under the India-UK bilateral investment protection agreement.

India’s trade minister Nirmala Sitharaman raised the difficulties faces by Indian students getting visas to UK with Fox during the JETCO meeting.

Sitharaman told Fox that Indian students no longer willing to go to UK as the current visa regime discourages them to do so. However, Fox sought to clarify that any fall in the number of Indian student visas is because the UK has shut down some spurious educational institutions that Indian students earlier used to go to, sometimes unknowingly.

Sitharaman also raised the issue of totalization agreement as Indian professionals lose their social security payments once they return after their short stay in the UK.

Briefing reporters, Sitharaman said she raised the issue of higher visa fees to fund the UK’s skill development. “It does not encourage competitiveness in services sector," she said.

Borrowing from views expressed on her social media timeline, Sitharaman told Fox that there is this impression that the UK wants India’s market and investments but does not want India’s talent. “We told it very clearly that a professional going to the UK as part of a short term project after which he will return to India cannot be compared with migration," Sitharaman said.

The Joint working group which was constituted during the visit of Fox in August will study the trade and business environment between now and the next JETCO to find out the early deliverables in trade between the two sides. “It will also identify the prevailing challenges to strengthen bilateral trade," Sitharaman said.

Sitharaman said UK is eager to have an FTA with India but ruled out formal negotiations for an FTA with UK before Brexit is executed. “We are conscious of the fact that after triggering Article 50, they need 24 full months to negotiate Brexit. UK prime minister May during the lunch said that she expects to invoke Article 50 sometime in the first quarter (January-March) of 2017," Sitharaman said.

Sitharaman said Fox supported India’s proposal for a trade facilitation agreement in services at the World Trade Organisation. India, after presenting a concept note at the WTO is currently doing the legal vetting for a formal proposal that it sees as a deliverable at the next year’s WTO ministerial.

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Published: 08 Nov 2016, 01:38 AM IST
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