Vodafone wins international arbitration against India in ₹14,200-crore tax dispute case
Paper:
Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.
Why in news?
In a unanimous decision, the Permanent Court of Arbitration at The Hague ruled that India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on the British telecommunication company for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”.
Key Details:
- The court has also asked India not to pursue the tax demandany more against Vodafone Group.
- India had claimed a total of ₹279 billion ($3.79 billion), including about $2 billion in tax, as well as interest and penalties.
- It also directed India to pay 4.3 million pounds ($5.47 million) to the company as compensation for its legal costs.
- The tribunal held that any attempt by India to enforce the tax demand would be a violation of India’s international law obligations.
Permanent Court of Arbitration
- The Permanent Court of Arbitration(PCA) is an intergovernmental organization located in The Hague, Netherlands.
- It is not a court in the traditional sense, but provides services of arbitral tribunalto resolve disputes that arise out of international agreements between member states, international organizations or private parties.
- The cases span a range of legal issues involving territorial and maritime boundaries, sovereignty, human rights, international investment, and international and regional trade.
- The PCA is constituted through two separate multilateral conventions with a combined membership of 122 states.
- The organization is not a United Nations agency, but the PCA is an official United Nations Observer.
- The decision is binding on the parties, and there is no mechanism for appeal.
Background:
- In May 2007, Vodafone had bought a 67% stake in Hutchison Whampoa for $11 billion. This included the mobile telephony business and other assets of Hutchison in India.
- In September that year, the India government for the first time raised a demand of Rs 7,990 crore in capital gains and withholding tax from Vodafone, saying the company should have deducted the tax at source before making a payment to Hutchison.
- Vodafone challenged the demand notice in the Bombay High Court, which ruled in favour of the Income Tax Department.
- Subsequently, Vodafone challenged the High Court judgment in the Supreme Court, which in 2012 ruled that Vodafone Group’s interpretation of the Income Tax Act of 1961 was correct and that it did not have to pay any taxes for the stake purchase.
- The same year, GOI, circumvented the Supreme Court’s ruling by proposing an amendment to the Finance Act, thereby giving the Income Tax Department the power to retrospectively tax such deals.
- The Act was passed by Parliament that year and the onus to pay the taxes fell back on Vodafone.
- The case had by then become infamous as the ‘retrospective taxation case’.
- Vodafone Group then invoked Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and the Netherlands in 1995.
Retrospective taxation
Retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed.
Many countries including the US, the UK, the Netherlands, Canada, Belgium, Australia and Italy have retrospectively taxed companies, which had taken the benefit of loopholes in the previous law.
What is the Bilateral Investment Treaty?
On November 6, 1995, India and the Netherlands had signed a BIT for promotion and protection of investment by companies of each country in the other’s jurisdiction.
The two countries would, under the BIT, ensure that companies present in each other’s jurisdictions would be “at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other”.
It’s National Medical Commission now
Paper:
Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.
Why in News?
The National Medical Commission (NMC) has replaced the Medical Council of India (BoG-MCI), as per information released by the Health Ministry.
Key details:
Dr. Suresh Chandra Sharma, former head of ENT, All India Institute of Medical Sciences (AIIMS), Delhi, has been appointed as its chairman for three years.
- The change was aimed at bringing in reforms in medical education.
- The government dissolved the MCI in 2018, replaced it with a Board of Governors (BoG).
- “Indian Medical Council Act, 1956 (102 of 1956) is hereby repealed with effect from September 25.
- The BoG appointed under section 3A of the Indian Medical Council Act, 1956 (102 of 1956) in supersession of the MCI constituted under sub-section (1) of section 3 of the said Act shall stand dissolved,” stated the gazette notification issued by the Union Ministry of Health and Family Welfare (MoH&FW).
- The NMC will have four separate autonomous boards:
- Under-graduate medical education,
- postgraduate medical education
- Medical assessment and
- ratings and ethics and medical registration.
Implications:
- This historic reform will steer medical education towards a transparent, qualitative and accountable system.
- The basic change that has happened is that the Regulator is now selected on merits, as opposed to an elected Regulator.
- Men and women with impeccable integrity, professionalism, experience and stature have been placed at the helm to steer the medical education reforms further.
Quad discusses 5G, Indo-Pacific infrastructure
Paper:
Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.
Why in news?
Senior officials from the Foreign Ministries of “the Quad” group of countries — India, the U.S., Australia and Japan — met virtually during the United Nations high level week, as part of their periodic consultations on the Indo-Pacific region.
Key details:
- Officials discussed “ongoing and proposed practical cooperation in the areas of connectivity and infrastructure development”.
- The U.S. State Department spelt out the discussion on connectivity more.
- In an effort to stop Chinese 5G giant Huawei from setting up shop networks in other countries, U.S. has been promoting “clean telcos” — a list of companies considered by the U.S. administration to be free from security risks and the risk of surveillance by the Chinese government.
- Other topics discussed by the Quad officials, included counter-terrorism, cyber and maritime security, and quality infrastructure in the region.
QUAD
- Quadrilateral Security Dialogue (Quad) is the informal strategic dialogue between India, USA, Japan and Australia with a shared objective to ensure and support a “free, open and prosperous” Indo-Pacific region.
- The idea of Quad was first mooted by Japanese Prime Minister Shinzo Abe in 2007.
- In December 2012, Japan again proposed the concept of Asia’s “Democratic Security Diamond” involving Australia, India, Japan and the US to safeguard the maritime commons from the Indian Ocean to the western Pacific.
- In November 2017, India, the US, Australia and Japan gave shape to the long-pending “Quad” Coalition to develop a new strategy to keep the critical sea routes in the Indo-Pacific free of any influence (especially China).
Indo-Pacific
- The Indo-Pacific, sometimes known as the Indo – West Pacificor Indo-Pacific Asia, is a biogeographic region of Earth’s seas, comprising the tropical waters of the Indian Ocean, the western and central Pacific Ocean, and the seas connecting the two in the general area of Indonesia.
- It does not include the temperate and polar regions of the Indian and Pacific oceans, nor the Tropical Eastern Pacific, along the Pacific coast of the Americas, which is also a distinct marine realm.
- The term is especially useful in marine biology, ichthyology, and similar fields, since many marine habitats are continuously connected from Madagascar to Japan and Oceania, and a number of species occur over that range, but are not found in the Atlantic Ocean.
- Since 2011, the term ‘Indo-Pacific’ is being used increasingly in geopolitical discourse.
LIC, GIC, New India Assurance identified as D-SIIs
Paper:
Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management
Why in News?
The Life Insurance Corporation of India (LIC), General Insurance Corporation of India and The New India Assurance Co have been identified as Domestic Systemically Important Insurers (D-SIIs) for 2020-21 by insurance regulator IRDAI.
Key Details:
- Given the nature of operations and their systemic importance, the three public sector insurers have been asked to raise the level of corporate governance and identify all relevant risk and promote a sound risk management culture.
- The D-SIIs will also be subjected to enhanced regulatory supervision.
Domestic Systemically Important Insurers (D-SIIs)
- D-SIIs refer to insurers of such size, market importance and domestic and global inter connectedness whose distress or failure would cause a significant dislocation in the domestic financial system.
- D-SIIs are perceived as insurers that are ‘too big or too important to fail’.
- This perception and the perceived expectation of government support may amplify risk taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in future.
- These considerations require that D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues.
Methodology for identification and supervision of D-SIIs.
- The parameters include the size of operations in terms of total revenue, including premium underwritten and the value of assets under management; and global activities across more than one jurisdiction.
- D-SIIs would be identified on an annual basis and disclose the names of such insurers for public information.
Importance:
- The continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy.
- In January 2019, while announcing the formation of a committee on D-SIIs, the insurance sector had grown exponentially in the last 15 years and a few of the insurers have a sizeable market share and interconnected with other financial institutions as well.
- The failure of D-SIIs has the potential to cause significant disruption to the essential services they provide to the policyholders and, in turn, to the overall economic activity of the country.
- The constitution of the committee came in the backdrop of the International Association of Insurance Supervisors (IAIS) asking all member countries to have a regulatory framework to deal with Domestic-SIIs.
G7 backs extension of debt freeze
Paper:
Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.
What’s in News?
G7 finance ministers have backed an extension of a G20 bilateral debt relief initiative for the world’s poorest countries.
Key Details:
- In a joint statement, the ministers said they “strongly regret” moves by some countries to skip participation by classifying their State-owned institutions as commercial lenders.
- The reference was targeted at China, which has refused to include loans by the state-owned China Development Bank and other government-controlled entities when dealing with countries seeking debt relief.
Group of Seven (G7):
- The G7 or the Group of 7 is a group of the seven most advanced economies as per the International Monetary Fund (IMF).
- The seven countries are Canada, USA, UK, France, Germany, Japan and Italy.
- 5 members of the G-7 (United States, Germany, Italy, France, Japan) are members of the NATO Quint (The Quint is the informal decision-making body of NATO).
- As of 2018, the seven countries involved represent 58% of the global net wealth ($317 trillion) and more than 46% of the global gross domestic product (GDP) based on nominal values, and more than 32% of the global GDP based on purchasing power parity.
- The European Union is an invitee to G7.
- The concept of a forum for the world’s major industrialized countries emerged before the 1973 oil crisis.
- The People’s Republic of China, according to its data, would be the second-largest with 16.4% of the world net wealth, but is excluded because the IMF and other main global institutions do not consider China an advanced country and because of its relatively low net wealth per adult and HDI.