Admire the casuistry here

Arguing that the ISDS in the TTIP etc will be a disaster and against justice:

Vodafone vs India
Vodafone is now one of the largest mobile
network operators in India, with more than
180 million customers – almost three times the
total population of the UK.24
The British telecommunications giant – one of
the largest in the world – entered India in 2007
through a complex transaction resulting in its
indirect purchase of a controlling interest in the
Indian phone company Hutchinson Essar Ltd.
Through its Dutch subsidiary, Vodafone acquired
a company registered in the Cayman Islands
(a renowned tax haven) which in turn held an
indirect interest in Hutchinson Essar Ltd through
multiple layers of companies including those
registered in Mauritius (another well-known
tax haven).25
Because this transaction involved the purchase
of assets in India, albeit indirectly, Indian tax
officials said Vodafone should have to pay
capital gains tax in India. Vodafone disagreed,
arguing that the deal happened overseas,
outside of India’s jurisdiction.
The ability of governments to tax the indirect
sale of assets in their countries has become an
increasingly hot topic as corporate structures
have become more complex and multinationals’
strategies to minimise their tax bills, including
the use of offshore transactions, have become
more aggressive.26
After the Indian government amended its tax
code in 2012 to explicitly require that capital
gains taxes be paid on the indirect sales of
assets in India, with retrospective effect, it served
Vodafone with a multi-billion dollar bill.27
Vodafone responded with an ISDS claim, arguing
that the state had breached its obligations
under a bilateral investment treaty signed
between India and the Netherlands in 1995.28
Years after the case began, the Indian
government is reportedly looking to settle
the dispute.29 But it is also trying to limit its
vulnerability to other cases like this in future.
In December 2015 the text for India’s new
“model” bilateral investment treaty – to be
used in negotiations as the basis for any future
trade treaties and free trade agreements – was
approved, including in it explicit language
excluding tax disputes from its scope. It also
includes a new clause requiring investors to
exhaust local remedies and file claims in local
courts before heading to ISDS tribunals.

Now all of that is true. But they’ve left out one rather interesting little bit.

After the Indian government amended its tax
code in 2012 to explicitly require that capital
gains taxes be paid on the indirect sales of
assets in India, with retrospective effect,

Immediately before that the Supreme Court of India ruled that Vodafone were absolutely correct, on two different grounds, the tax was not owed. Only after that did the country change the law retrospectively. And might we not think that foreign investors should have protection over governments just making shit up as they go along? and why in buggery are these people supporting the ability of governments to do that?

14 thoughts on “Admire the casuistry here”

  1. It wasn’t even tax on Vodafone – it was capital gains tax on Hutchinson’s profit when Hutchinson sold the business to Vodafone.

  2. This treaty is undemocratic and allows multinationals and the 1% to steal what belongs to the people, hiding behind a nation’s treaty obligations and “rule of law” and…

    Oh sorry, isn’t this the Tax Research UK blog?…my mistake.

  3. The bizarre thing is that people like this appear to want governments to be unconstrained by the rule of law, but still kid themselves that they are anti-establishment.

    In a different age these people would have been assuring us that Charles I was divinely appointed and that ship money was quite alright.

    Unfortunately this sort of bend-the-knee statism, like puritanism and illiberalism generally, actively seems to be fashionable amongst the young.

  4. “The bizarre thing is that people like this appear to want governments to be unconstrained by the rule of law, ”
    Because they think justice should be moral.
    There’s just as much problem with this, over on the libertarian side, with the “natural law” fiction. Also based on morality.
    Trouble is, morality isn’t an absolute. Laws have to be an absolute. And laws are arbitrary. Because they can’t conform with everyone’s version of morality. You get the morality of the lawmakers.
    So “why in buggery are these people supporting the ability of governments to do that?”
    Why not?

  5. @BiS

    The content of the laws will always be “arbitrary” (in the almost meaningless sense of being decided by humans), but we can still attempt to minimise the arbitrariness of the enforcement, by allowing people to have some ability to know in advance what the legal consequences of their actions will be. This requires non-retroactive enforcement.

  6. “we can still attempt to minimise the arbitrariness of the enforcement, by allowing people to have some ability to know in advance what the legal consequences of their actions will be. This requires non-retroactive enforcement.”

    Which is, of course, a moral position. Another moral position would be; just because we got it wrong doesn’t mean we can’t go back & change it. They’re both equally valid.

  7. This is why India will always be poor. It’s ruled by a caste of baksheesh-chasing petty tyrants.

    That, and their mentality of lazy corner cutting and cheating-is-as-good-as-learning, is why China – and not India – will be Asia’s hegemon.

  8. I have long since been surprised by the most common (always leftist) argument against trade deals (FTA, NAFTA, the current Pacific and Atlantic deals, etc), which boils down to the fact that they will prevent national (and sub-national) governments from passing retroactive, arbitrary, and inevitably bad legislation. For those assholes, arbitrary, bad, and targeted legislation is not to be avoided – it is to be actively promoted, and celebrated when achieved.
    Complete bloody wankers, the lot of them!

  9. @ dcardno
    IMHO the complaints by the leftists against trade deals are almost invariably an attempt to protect the overpayment oif their unionised paymasters from the impact of free trade. Cheap labour in Mexico gets a pay rise while overpaid peopke in Chicago have the choice of working harder or getting a cut in real income. There are significant real gains for every country but a redistribution towards the poor from the unions. Leftists rarely support the poor.

  10. Definitely John. And by the same token, maybe it’s time the world’s banking, insurance etc moved to some third world country, give them a crack. I’m sure the boys in the City’d welcome to take a pay cut or do some hard graft.
    For I have noticed, when the UK’s professional classes’ jobs are threatened they squeal like stuck pigs.

  11. It is going to happen, BiS, the wideboys of London exist in most free markets. But Murph tells us that free markets don’t exist. So where is the new breed of wideboy going to come from?

  12. @ bis
    If one is self-employed squealing like a stuck pig does one no good at all.
    Actually Bermuda *was* a third world country before the insurers moved there.
    Big banks in third world countries ain’t gonna happen, not because of the City types but because of governments who demand that they hold a significant percentage of safe assets comprised of cash and government bonds. So you cannot have a bank whose asset base is more than a certain multiple of the country’s debt and the debt isn’t a safe asset if it’s more than twice GDP.

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