Column : From Foxconn to Nokia, and more
Having said this, the Budget then says it proposes to amend the income tax act to remove any scope for confusion but, and here’s the Vodafone link, “these amendments will take effect retrospectively from 1st June, 1976 and will accordingly apply in relation to the assessment year 1977-78 and subsequent assessment years.” The taxman has done well to issue clarifications, but going all the way back to 1976?
But let’s go back to the Foxconn case. If the Chinese taxman was to say Foxconn (and Foxconn would bill Apple for it) was to pay a tax on the software it got from Apple for putting into the iPhone or the iPad, this would increase the costs of manufacturing in China—the Chinese taxman probably treats the software as yet another component that is being imported and, since the final product is being re-exported, there is no tax levied on it.
In each case, whether it is Shell, Nokia or Vodafone, or the countless others, the real issue that needs to be kept in mind is the costs of this tax stridency—this is why the Parthasarathi Shome committee was against retrospective amendments; this is why, despite everything, India