Taxes not for Vodafone.

The Supreme Court in India has ruled that Vodafone need not a paisa tax on its purchase of mobile phone operator Hutchison Essar in 2007 for $11 billion. Vodafone argued that the transaction took place between a Cayman Islands based company and Hutchison Whampoa of Hong Kong and was therefore outside the jurisdiction of India. The seller, that is Hutchison should have paid tax on its profits but as usual Indian tax authorities were sleeping. When they woke up they asked Vodafone to pay $2.2 billion in taxes plus added penalties for not withholding the amount as per Indian laws. As is its habit Vodafone refused to pay and now the Supreme court has backed it. Why? If the Indian law says that tax has to be withheld by the buyer then surely the onus is on Vodafone to pay and not knowing the law is no defence, as we are told repeatedly. It is like arguing that if an Indian living in Cayman Islands sells a house in UK to another Indian living in Hong Kong for a huge profit he is not liable for tax because the transaction took place outside UK. That is patently rubbish. Since the asset was in India the tax will accrue here. However, Indian tax fellows need not feel foolish. Vodafone is a master of evading taxes. In 1999 it bought a 45% stake in Verizon Wireless, a mobile operator in the US by borrowing $12.6 billion from the Swiss branch of Vodafone Holdings based in Luxembourg. Later the borrowing was increased to $27 billion on which Vodafone paid interest of $2.5 billion at 9% when interest rates were much lower. They paid just 1% tax according to Swiss laws and nothing in Luxembourg. Again in 2001 Vodafone bought Mannesmann, a German engineering firm for 180 billion pounds, through its subsidiary in Luxembourg, on which the tax should have been 6 billion pounds. Private Eye, January 10. After prolonged negotiation Dave Hartnett, chief of HM Revenue and Customs accepted a lump sum of 800,000 pounds and another 450,000 pounds to be paid over 5 years. At a time when citizens are being taxed on everything from diapers to funerals it is unacceptable that foreigners should make wealth here without paying taxes. With such massive sums at stake it is not impossible that some under-the-table handshakes took place. This money would go into the property market but that is another story. India is so so interesting, no.