Sometime back I had heard the phrase “No one is above the law”. While this sounded just then, the reality is that the law enforcers are the first ones who bend laws to suit themselves.
The current spate between the government and vodafone over capital gains taxes is a case of lawmakers twisting the law to boost their egos.
The story goes like this:
Hutchinson Whampoa decided to leave India in 2007 and passed the baton of telecom licences to Vodafone. Retrospectively, It has turned out to be the best thing to do since the government is now destroying the industry. Now by law, someone needs to pay the capital gains tax on the transaction, had the gain been made by a company of Indian origin. But it wasn’t, since Vodafone plc is British and Hutchinson Wampoa from Hong Kong.
But this didn’t deter the IT sleuths from going after the transaction. But they had no jurisdiction in Hong Kong, hence couldn’t send the tax bill. So the scapegoat was the entity that wanted to do business in India, and a controversy was started.
5 years on, the Supreme court passed the judgment that the income tax department couldn’t ask for anything from vodafone since there was no such law in 2007. Red faced over the high profile loss, the finance minister jumped into action to undo what supreme court had ruled. And the concept of retrospective amendment was born. This allows the government to tax any deal dating as back as 1962.
This is the kind of circus going on in the highest echelons of the Indian government. Allowing retrospective amendments at will is akin to opening a can of worms. Consider these cases:
1.Raise income tax rates of people to double, effective 1991. So anyone who hasn’t paid double income tax since 1991 has violated the law and has to pay a fine as well.
2. Add luxury tax of 200% on all hotels with effect from 2000. So hotels who haven’t paid 200% tax since then will face penalty.
Somewhere I had heard that we live in a free and fair society, that doesn’t hold true any more.