#73 Thinking About Retrospective Taxation - Will India Appeal? 🎧

This newsletter is really a public policy&#160;thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question:&#160;how do I think about a particular public policy problem/solution?<br/><br/>Welcome to the mid-week edition in which we write essays on a public policy theme. The usual public policy review comes out on weekends.<br/><br/>PS: If you enjoy listening instead of reading, we have this edition available as an audio narration courtesy the good folks at&#160;<a href="https://www.ad-auris.com/">Ad-Auris</a>. If you have any feedback, please send it to us.&#160;<a href="https://publicpolicy.substack.com/account/add-podcast">Listen in podcast app</a><br/><br/>- RSJ<br/><br/>The Permanent Court of Arbitration at The Hague last week ruled against India&#8217;s retrospective tax demand of Rs. 22,100 crores on the Vodafone Group. India has the option to appeal the decision at the appellate court in Singapore. Vodafone International Holdings, a Dutch entity, that had bought the Indian business operations of Hutchison Telecom International had invoked Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and Netherlands in 1995 to contest the retrospective amendment of taxation law by India.<br/><br/>A quick background of the case will help set the context here. In 2007, Vodafone Plc bought a 67 per cent stake in Hutchison Whampao that included the rising star of the group &#8211; its India business assets. The tax department raised a demand for about Rs. 8000 crores that year in capital gains and withholding tax from Vodafone. Their argument was simple &#8211; the underlying place of business was India and the value that was being paid for by Vodafone was created in India. It should therefore withhold the taxable amount from what it pays to Hutchison. It didn&#8217;t matt