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Monday, August 2, 2010

Mr Cameron's Pakistan-bashing was just to save Vodafone....

A lot has been said about the conduct of British Prime Minister David Cameron during his recent visit to India. He was in a usual Pakistan-bashing mood but it hurt our feelings because he was speaking from Indian soil and was saying something to please his Indian counterpart, of course at the expense of Pakistan. Pakistan has become such a decent boy that it does not even scream when it is being whipped. Some people said that he was trying to please the Indian Prime Minister to be able to capture Indian market and build trade relations with India.
Well, his Pakistan-bashing may not be truly diplomatic for a novice Prime Minister, it made perfect commercial sense. But Wall Street Journal has propounded quite a different theory. According to the newspaper, the new-found love between Indian and the UK depends largely on the outcome of one of the big British corporate giants fight against Indian tax authorities. In effect, British PM’s visit was intended to bail out Vodafone from a huge tax liability in India which runs into billions of dollars. Incidentally, hearing of the company’s case in Indian Court of Law challenging Indian Revenue officials’ jurisdiction to impose tax on Vodafone is pending. The paper fears that his efforts to expand commercial ties between the two countries could fail if a major tax dispute between U.K. wireless giant Vodafone Group PLC and Indian tax authorities was not favorably addressed by the court.
Indian authorities are seeking to tax Vodafone for its $11.2 billion acquisition of a controlling stake in one of India's largest cell phone companies in 2007. Vodafone has mounted a stiff legal challenge, arguing that India's income tax department doesn't have jurisdiction to tax the deal, which was structured as a transaction between two corporate entities outside India. The case has reached a pivotal juncture just as the British delegation is set to arrive. This week, a judge in the Bombay High Court is expected to hear arguments from the two sides over the question of jurisdiction. In coming weeks, he will issue a verdict on whether Vodafone is liable for the taxes, which could total up to $2.6 billion. The decision could become a thorn in the otherwise positive relations between India and the U.K. Mr. Cameron and his Conservative Party have called for a new "special relationship" between Britain and India, one that analysts say will be based in large part on increased trade and investment, as well as security.
But the Vodafone dispute—a high-profile case against one of Britain's biggest corporate names—could be an area of contention. The British delegation, which probably included Vodafone Chief Executive Vittoria Colao, was likely to raise concerns about the case with top Indian officials, including Prime Minister Manmohan Singh. The decision in the Vodafone case could also have far-reaching implications for how foreign companies view India as a destination for investment. A ruling against Vodafone could deter multinational companies from pursuing big-ticket deals in India, some experts say.
As a matter of principle, the British PM should have respected the Judiciary of India and refrained from influencing something which was already pending adjudication. Normally, such gestures constitute the contempt of court, but as long as the Courts other than the Royal Court are concerned, who cares?

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