Vodafone Tax Case: An Unending Tale Of Lessons

Dhwaja Shrivastava, Akshat Jain & Aadarsh Mittal

ABSTRACT

In the recent decades, the globalization has led to advent of companies operating in more than one nation. Such companies for long time have been hailed as the torchbearer of development of nations as they bring technological advancements, foreign investment etc. However, at the same time the rising concern for the governments is the persisting nature of companies to avoid paying the taxes. The situation is of such nature, that President of United states of America Joe Biden had to publicly admit that MNCs contribution to tax is negligible or zero.

The MNCs have the privilege of having companies in more than one nations, thereby it becomes easy for companies to route their finance through companies and it is general to carry out transaction between or amongst the different subsidiary company present in different countries. The consistency of such transactions upset the tax authorities of being unable to tax such transactions because of legal impediments.

The Vodafone tax case is a classic case study involving rounds of litigation, negotiations and arbitration. The present paper examines the relevance of Vodafone tax case in three sections, firstly it delves upon the litigation and ruling of Hon’ble Supreme court, secondly it examines the legislative response to the judgment in the form of amendment and test it on the basis of earlier precedent, thirdly, it delves upon the arbitrability of tax dispute as Vodafone invoked the arbitration clause existing bilateral investment treaty (BIT). The paper concludes by highlighting certain lessons that are taught by the conundrum of Vodafone tax case.

Keywords: Retrospective tax, Arbitrability, Investment Treaty.