Further to the last
blog, if any further proof of the absurdity of current tax systems were needed,
there follows what may well turn out to be a sample question and answer from
revenue law examinations of the very near future...
“Question: if a
company based in the Netherlands buys a company based in the Cayman Islands,
where should they pay tax on the deal?”
“Model Answer: India,
sympathy may be limited by the fact that the purchaser in question is Vodafone,
the Indian tax man’s claim for capital gains tax on the assets that happen be
in India of a non-Indian company that is purchased by another non-Indian
company is both arrogant and dangerous.
If an enterprise must
provide information and pay tax on its worldwide activity to every jurisdiction
in which it happens to do business, then it has an incentive to minimise the
number of jurisdictions in which it does business.
Unless the Indian
courts show real independence by rejecting this greedy claim, a precedent could
be set that could do more to reduce world trade than the recession.