There will be no rethink on Vodafone tax: FM

In a strong message to multinationals campaign against taxing Vodafone, Government today ruled out any rethinking on the issue making it clear that India cannot be a tax haven just to attract foreign investment.

It also asserted that Parliament has the right to make amendments to law to correct Supreme Court judgement and would not allow a situation where a corporate would avoid paying tax here by operating from a tax haven.

"I would like to be guided either by Double Taxation Avoidance Agreement (DTAA) or tax. There cannot be a situation that somebody will make money on an asset located in India and will not pay tax either in India or to the country of its origin.

"...Because of making some arrangements through certain tax haven areas through a complicated setting up of series of subsidiaries and having huge capital gains on the assets located in India," Finance Minister Pranab Mukherjee said in a forthright assertion of the proposal to make a retrospective amendment to tax Vodafone-type deals.

In an hour-long speech in reply to the debate in the Lok Sabha on the Finance Bill, he said taxing Vodafone is about combating black money menace and referred to the Supreme Court judgement which had held that the British telecom major was not liable to pay tax on its acquisition of Hutchison stake in Hutchison Essar in 2007. The Bill was later passed.

Ever since the Budget proposed to amend the Income Tax Act with retrospective effect to tax Vodafone-type deals, international business and domestic industry have been campaign against such a move saying it would hurt foreign investment.