Businesses are watching India closely as the Modi government cuts taxes and takes other steps to woo investors into the enormous market. One place to watch is the Hague, where a longstanding dispute between India and Cairn Energy is playing out.
Cairn Energy is fighting a big tax bill—$1.6 billion plus interest and penalties—that India delivered retroactively for a 2006 internal restructuring transaction. The company took India to binding arbitration at the International Court of Justice, under terms of the bilateral investment treaty. India's position is that the treaty doesn't govern tax issues.
Whatever the outcome, India's response could signal the country's posture with respect to arbitration and, generally, to the issue of tax sovereignty.
Talking Tax hosts Amanda Iacone and Siri Bulusu discuss the Cairn case, with a special insight from Mukesh Butani, managing partner at BMR Legal in New Delhi, and specialist in international tax and transfer pricing law.
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