Vodafone has asked the Indian government to abandon or suitably amend the retrospective aspects of the tax proposals in the Finance Bill 2012
New Delhi: Vodafone on Tuesday threatened to drag the government to international arbitration over retrospective tax legislation under the bilateral investment treaty (BIT) between India and the Netherlands, reports PTI.
Dutch subsidiary Vodafone International Holdings BV (VIHBV) today severed a notice of dispute on the Indian government regarding proposals in the Finance Bill 2012 which it claimed violated the international legal protections granted Vodafone and other international investors in India.
In a regulatory filing to the London Stock Exchange, Vodafone has asked the Indian government to abandon or suitably amend the retrospective aspects of the proposed legislation as Vodafone would prefer to reach an amicable solution to this matter.
"However, if the Indian government is not willing to do so, Vodafone will take whatever steps are necessary to protect its shareholders' interest, including investment treaty arbitration proceedings under the BIT against the Indian government," the company said.
In the Budget, the government announced a proposal to amend the Income Tax Act to bring overseas deals such as Vodafone's purchase of Hutchison under tax net after the Supreme Court held that the UK firm was not liable to pay the Rs 11,000 crore in taxes.
This is sought to be done through a retrospective amendment to the Income Tax Act which gives authorities powers to reopens cases as far back as 1962 under the Finance Bill 2012.
The Vodafone statement said that the dispute arose from the retrospective tax legislation proposal which, if enacted, would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone.
It said the proposed legislation would also countermand the verdict of the Supreme Court in January 2012, which ruled that Vodafone had no liability to account for withholding tax on its acquisition of indirect interests in Hutchison Essar Limited in 2007.
Under the BIT, Vodafone said the Indian government is obliged among other things to accord fair and equitable treatment to investors, provide full protection and security, not breach the legitimate expectations of investors in making investments, not deny justice or breach previously provided assurances and not take steps to indirectly expropriate the investment.
The statement said Vodafone believes that the retrospective tax proposal amount to a denial of justice and a breach of the Indian government's obligation under the BIT to accord fair and equitable treatment to investors.
It said the Indian government's retrospective tax proposals have also raised significant and widespread concern within India and internationally and have been criticised by businesses and industry bodies representing more than 250,000 companies across the US, Europe and Asia.
Some banks are charging pre-payment penalty of 1-2% of the outstanding loans and the central bank feels that there a need for ensuring uniformity across the banking system in this regard
Mumbai: Providing relief to home loan borrowers, the Reserve Bank Of India (RBI) on Tuesday asked banks not to levy any penalty on pre-payment of loans taken on floating rate, reports PTI.
"Though many banks have, in the recent past, voluntarily abolished the pre-payment penalties on their floating rate home loans, there is a need for ensuring uniformity across the banking system in this regard," RBI said in the annual monetary policy announcement for 2012-13.
"Accordingly, it is proposed not to permit banks to levy foreclosure charges or pre-payment penalties on home loans on a floating interest rate basis," it said.
It is believed that removal of foreclosure charges or prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and the competition among banks will result in finer pricing of home loans with the floating rate.
Detailed guidelines in this regard will be issued separately, RBI said.
Some banks were charging pre-payment penalty of 1-2% of the outstanding loans.
Last year, a consensus was reached at the Banking Ombudsmen Conference to the effect that banks should not impose pre-payment charges on loans with a floating rate of interest.
The policy noted that the Damodaran Committee had observed that foreclosure charges levied by banks on prepayment of home loans were resented upon by home loan borrowers across the board.
This is, especially, since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario.
As such, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.
Last year, housing finance regulator National Housing Bank (NHB) directed all housing finance companies to desist from imposing a pre-payment penalty.
While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies
Mumbai: Making a case for raising prices of diesel, kerosene and LPG, the Reserve Bank of India on Tuesday said hike in rates of petroleum products is necessary to arrest fiscal slippages, reports PTI.
"Overall from the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true costs of production," RBI governor D Subbarao said in the annual monetary policy statement for 2012-13.
While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies.
Global crude oil prices have surged since the beginning of 2012 on account of geo-political concerns in the Middle East and abundant global liquidity. The price of Brent crude rose to $120 a barrel in mid-April from $111 in January.
RBI said the Budget estimate of oil subsidy is likely to fall "significantly short of the required amount".
High subsidies are putting pressure on the country's fiscal deficit, which touched 5.9% of GDP last fiscal and is pegged at 5.1% in 2012-13. India imports about 80% of its crude oil requirement.
The government targets to bring down the subsidy bill to below 2% of GDP this fiscal and 1.75% in the subsequent years. Government has made a provision of Rs 40,000 crore towards fuel subsidy for 2012-13.
"...Several upside risks to the budgeted fiscal deficit remain. Containment of non-plan expenditure within budget estimates for 2012-13 is contingent upon the government's ability to adhere to its commitment of capping subsidies," Subbarao said.
Mr Subbarao said any slippage in fiscal deficit would have implications for inflation. "Upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates," he said.
Persistent demand pressure emerging from inadequate steps to contain subsidies, as indicated in the recent Union Budget, will further reduce the space for rate cut, he added.
Fuelled by gold demand, crude oil prices and decelerating growth in emerging economies, India's current account deficit (CAD), widened to 4% of GDP in April-December 2011, up from 3.3% a year ago.
CAD is the difference between inflow and outflow of foreign exchange into the country.
In its Macroeconomic and Monetary Developments in 2011-12 report, the RBI had yesterday said, "The policy design to achieve macro-objectives hinges on deregulation and the upward adjustment of oil prices by letting the demand effects work towards diminishing fiscal and external risks".