Global bodies want US to take up Vodafone issue at IMF meeting
Excluding Apple, which is due to report results next Tuesday, the technology sector is looking at an earnings decrease of 0.3 percent
Batting for Vodafone, several US-based industry associations have asked Washington to take up the controversial issue of amending the Income Tax Act with retrospective effect with India at the upcoming IMF-World Bank Spring Meetings.
"We strongly encourage you to raise these concerns (retrospective amendment to I-T Act and GAAR provisions) and seek clarity on the scope and international consistency of the proposals during the upcoming IMF and World Bank meetings," about a dozen industry associations said in a letter to US Treasury Secretary Timothy Geithner.
Finance Minister Pranab Mukherjee, who is in the US to participate in the Fund-Bank Spring Meetings later in the week, is also likely to hold bilateral talks with Geithner.
The issue pertains to a proposal in the Finance Bill 2012 which seeks to amend law to retrospectively tax cross-border transactions dating back to April 1, 1962.
The move follows the Supreme Court ruling that Vodafone wasn't liable for taxes (about Rs 11,000 crore) stemming from its 2007 acquisition of Hutchison's stake in Hutchison-Essar.
The letter written by industry associations, including US-India Business Council, said "the unprecedented nature of this amendment sets a particularly poor precedent and, consequently, we believe it essential that the US Treasury speak out so that other countries might be dissuaded from enacting similar policies".
As regards the General Anti Avoidance Rules (GAAR), the industry associations has said that unclear anti-abuse rules would have a negative implications for the companies investing in India.
"The proposals, which include an unprecedented period of retroactive tax collection, a broad and unclear general anti-abuse rule (GAAR) and an onerous tax on indirect stock transfer, are inconsistent with international tax policy and standards and result in significant erosion of the rule of law," the letter said.
The letter was also marked to US Secretary of State Hillary Clinton, US Trade Representative Ron Kirk and Commerce Secretary John Bryson.
In the Finance Bill 2012, the government has proposed to include GAAR provisions, which is aimed at targeting deals whose purpose is tax avoidance.
Such amendments, the letter said, "are inconsistent with India's specific obligations to the US under the current bilateral tax treaty.
"Furthermore, the unilateral definition of treaty terms may significantly alter the benefits and burdens of the existing Income Tax Treaty to the detriment of the US".
Copyright @Thomson Reuters 2012