vodafone

In a recent blog post, former Union finance secretary SC Garg said he sought voluntary retirement from the IAS prematurely as he did not get along with Finance Minister Nirmala Sitharaman. Now, Swadeshi Andolan, a group of mostly farmer activists who have taken up a large number of public interest issues, has written to President Ramnath Kovind and Prime Minister Narendra Modi seeking an investigation into how India lost the case against Vodafone at the International Arbitration Tribunal at The Hague in September. The activists say there is reason to believe that the finance minister colluded in this matter, making India lose the case.

In the letter, KV Biju of the Andolan demands an investigation into the role of Finance Minister Nirmala Sitharaman who had served as an employee of consultancy firm Pricewater House Coopers, Vodafone’s auditor.

The government has time until December to appeal this decision at The Hague, which could cause loss of Rs20,000 crore in taxes to the Government of India; this could also set a precedent, Biju writes, since other corporate houses like Sanofi and Vedanta have similar cases they could take to The Hague; loss to the national exchequer through such cases could amount to over Rs1 lakh crore.

In 2007, Vodafone acquired 67% share in the mobile phone business of Hutchison Whampoa, worth US $ 11 billion. Tax authorities then served notice to Vodafone for alleged failure to deduct withholding tax from the consideration paid to Hutchison Telecommunications.

A writ petition filed by Vodafone in the Bombay High Court against this was dismissed, and the matter was taken to the Supreme Court, which ruled in 2012 that “India had no territorial jurisdiction”.

Parliament took up this matter and an amendment was made to clarify the rules under Income Tax Act 1961, about the territorial jurisdiction of India, thus reviving the tax liability of Vodafone.

Amended Section 9, Explanation 5 read: “For the removal of doubts, it is hereby clarified that an asset or capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. ……………….”.

Under the amended law, notice of Rs14,200 crore was issued to Vodafone in January 2013.  Swadeshi Andolan’s letter of October 31, 2020 to the President and PM questions the move of the law ministry to seek conciliation in this matter. At a protest at Jantar Mantar in the national capital, Swadeshi Andolan had declared then Prime Minister Manmohan Singh “best slave of multinational capital” in 2013. Under pressure from activists, the move to go in for conciliation was abandoned by the UPA government.

The letter questions the NDA government’s move to docilely allow international arbitration in this case, when a matter of domestic taxation could have been stopped from going to The Hague. Even under the law, Vodafone should have paid the tax even as it pursued arbitration, the letter states.

In April 2014, as Vodafone served notice to the Government of India on international arbitration, Swadeshi Andolan started a campaign against government inaction in this matter and called for the boycott of multinational firms evading taxes in India. In February 2016, as pressure built, the government served notice on Vodafone for taxes amounting to Rs22,100 crore, including interest.

“The inaction of the finance ministry in not only blatantly illegal, it points to deeper rot. The Executive’s flagrant disregard for Parliament’s will manifested through law does not augur well for Indian democracy,” the letter states, reminding the government that India sees about 16,000 farmer suicides each year. The government does little to protect the lives of farmers, citing lack of revenue. In such a situation, allowing tax evasion on this scale by corporate houses reeks of corruption, the letter states.

What is significant also is that Vodafone, in the midst of this, changed its auditor and appointed Pricewater House Coopers, which is a firm that Finance Minister Nirmala Sitharaman has worked in. “We believe PwC and its ex-employee Nirmala Sitharaman colluded,” the letter states.

The letter calls for a probe in this matter, during which time the finance minister “must be kept away from the office”. The government must also cancel and re-negotiate all investment protection agreements, the letter states, and tax dues must be recovered from Vodafone.

Rosamma Thomas is a freelance journalist


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