Budget 2012: Amending laws not investor-friendly, says Vodafone

Telecom major Vodafone today said the government's move to retrospectively amend income tax laws does not augur well for investors but asserted that it has no plan to exit India.

"As a practising businessman in India, this will not augur well for foreign direct investment and the country at large," Vodafone India's non-executive Chairman Analjit Singh said in response to a query on the proposal to amend tax laws. Yesterday, a Finance Ministry official told PTI: "They (Vodafone) will have to automatically pay the tax after approval of the amendments to the Finance Bill by Parliament. We don't need to send fresh tax demand notice to them." In Budget 2012-13, Finance Minister Pranab Mukherjee has proposed amending the Income Tax Act retrospectively from 1962 to bring under net overseas deals involving domestic assets. This would have a bearing on Vodafone which won the legal dispute in Supreme Court over Rs 11,000-crore tax claim raised on its USD 11-billion deal with Hutchison Essar in 2007. "The question is not changing the rules of the game so substantially, particularly (since) Vodafone is one of the largest foreign direct investors in India where FDI is about USD 15-16 billion," Singh told a private news channel. His comments a day after the government refunded Rs 2,500 crore along with interest to Vodafone following dismissal of its review petition by the Supreme Court. On whether Vodafone would look at pulling out of India, he said the question is not even on the table. "Vodafone is an institution, Vodafone is there for opportunity. No... nobody from Vodafone has ever directly or indirectly conveyed anything like that, the question here is fairplay," he said. The government's proposed amendment has invited wrath of many a corporate honcho. Incidentally, US-India Business Council President Ron Somers today said: "Vodafone kind of cases sent a wrong signal to investors. It is a little regressive in nature. However, we believe this is one-off case and overall business environment will remain investor- friendly." According to Singh, the company has contributed USD 6 billion to the exchequer. "They have not taken a single cent or single penny out of the country," he said. "The question is for a company that came in under a set of rules under a promise, the democracy that we are and we have moved from a emerging market country to a developed country of sorts, this is not the right kind of message for the country to be given at this point of time," Singh said. He noted that capital gains from the deal was accrued by Hutchison. When Vodafone took advice whether they were required to withhold tax in light of capital gains, "every single advisor.. tax advisor opined it hasn't happened in 46 years, so it won't happen now," he added.