Wednesday, November 17, 2010

Indian tax push: stop whining Vodafone

A current tax dispute between Vodafone and India over capital gains taxes paid on offshore entities is in the news again. We have seen Vittorio Colao, Vodafone's chief executive, suggesting that Vodafone's future investments in India will depend, at least in part, on them getting their way in the tax case.

The details are a little messy and it's not clear who will win this dispute. But it is welcome that governments in developing countries are starting to flex their tax muscles, in the face of an international system that has been tilted against them for far too long. What is worth remembering is that in general terms, tax doesn't stop you from making profits - it only kicks in once there are profits. Investors will still flock to this huge market. If they have to pay something for the benefits they derive from being allowed to operate there, then that is only right and fair.

As Kevin Brown of the Financial Times rightly concludes:

"the case against Vodafone is no reason to dial down interest in India."


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