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Lessons for India from the US-France digital tax war

When France imposed its 3% digital services tax on large US digitized businesses, the US trade representative responded by imposing additional duties of up to 100% tariffs on French products worth USD 2.4 billion

Ashish Goel

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On March 27, 2020, the Indian Government gazetted the 2020 Finance Act, which inter alia expands the equalization levy (first imposed in 2016) to cover all kinds of digital e-commerce transactions into India, as well as those transactions which use Indian data. The new 2% levy will apply on consideration received or receivable by non-resident e-commerce operations from e-commerce supplies or services facilitated on or after April 1, 2020.

The rationale behind the government’s decision to tax the digital economy is not hard to understand. The principles of international tax law followed today were written several decades ago and have outlived their utility in today’s digitalized era. For instance, under tax treaties, a source country cannot tax business profits of a non-resident company unless that company carries on business activities in the source country through what is called a “permanent establishment”.

For a permanent establishment to exist, a company must have either a physical presence (mainly through setting up of offices) or a representative presence (through agents or employees) in the source country. Highly digitalized businesses that rely on hard-to-value intangible assets, data and automation can obviate such a presence, thereby escaping the corporate income tax net in the country in which they derive revenue from.

Such is the significance of the issue that the OECD, which explored ways to address these challenges as part of its ambitious base erosion and profit shifting project, failed to inspire international consensus on how the nitty-gritty of how such an international tax system could be designed. While the OECD is currently devising long-term solutions and is expected to deliver a final report by 2021, its slow progress prompted many countries to take short-term, unilateral measures to address the problem.

But the government’s decision to tax big US digital companies is likely to alarm the US government. Seven out of world’s ten largest online companies are based out of the US. The profits of these businesses were primarily taxed, if at all, in the US. However, changes to international tax rules pertaining to allocation of taxing rights between source and resident countries would mean that the US would get to enjoy a much smaller part of the tax pie.

Take the example of France. When France imposed its 3% digital services tax on large US digitalized businesses (with annual global revenue of over USD 800 million) such as Google, Amazon, Facebook and Apple (termed in France as “Les GAFA”), the US trade representative responded by imposing additional duties of up to 100 percent tariffs on French products worth USD 2.4 billion.

According to the US trade representative, the French digital service tax unfairly targeted large Silicon Valleybased digital businesses, is discriminatory in nature, and harmed the US’ interests. Soon after US’ decision to open an investigation was revealed, French President, Emmanuel Macron, struck a deal with the US government according to which it promised to abolish the tax and reimburse the tax paid by US businesses as soon as an international agreement on digital economy taxation is reached. 

Digital economy taxation has not troubled Europe alone. In fact, the worst affected are developing countries, such as India, which provide a huge consumer market for foreign digital brands. For instance, Amazon has a market share of over 30% in India, while Google and Facebook together claim 68% of India’s digital market. Additionally, India’s internet users are expected to reach 627 million this year. These numbers are bound to increase over time in the coming years as the Narendra Modi-government vigorously campaigns for a “Digital” and “Smart” India

While the profits that US digital businesses make out of their Indian operations increase every year, there is only a small of percentage of corporate income tax that the Indian government is able to collect from them. Companies such as Google and Facebook reportedly made INR 100 billion in revenues from the Indian market, but only paid INR 2 billion in taxes. Therefore, it goes without saying that international tax rules must be revisited.

The question, however, remains if India can afford to change tax rules unilaterally and risk foreign investments. Last time, when India sought to impose rules requiring US companies to store data in India, US President Donald Trump retaliated with a cap on H1B Visa. Trump has also been a vocal critic of India’s “unacceptable” import duties on certain US products. This is bound to be repeated if India sticks firm on unilateral digital economy taxation. India needs to learn a lesson or two from the French experience and wait for more concrete measures from the OECD before taking unilateral measures.

Ashish Goel is an international tax lawyer with COMTAX AB. He practices at the Supreme Court.

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Supreme Court upholds cancellation of fair price shop vacancies in West Bengal to implement Food Security Act, “no estoppel against statue”

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The Supreme Court in the case State of West Bengal vs Gitashree Dutta (Dey) observed in view of the implementation of National Food Security Act, 2013 and the court further noticed and dismissed the challenges faced against the cancelation of the declaration of Fair Price Shop vacancies.

The bench observed while agreeing to these contentions and therefore allowed the appeal:

While going by the observations of the Division Bench in the impugned judgment, that the State was aware of the 2013 Act while issuing the vacancy notification on 30th April 2014, the said notification cannot be sustained and the notification being contrary to the mandate of the National Food Security Act, 2013, more importantly of Section 12 thereof, there can be no estoppel against a statute. the appellants endeavoured to enforce the statute, The respondent herein being a mere applicant in an unfinalized selection process and when by recalling the vacancy notification it is seen that the respondent has no vested right in his favour to seek

The respondent in an unfinalized selection process has no vested right in his favour to seek continuation of the notified vacancies and further it was contended before the court that there can be no estoppel against a statute as the State endeavoured to enforce the statute while recalling the vacancy notification

Before the Apex Court, the State contended that it was reposed with a responsibility for implementing the 2013 Act which, inter alia, entrusted a responsibility to reform the existing Targeted Distribution System.

Inter alia praying for quashing of the Notification dated 17th August 2015, the respondent filled a writ petition before the High Court of Calcutta. The Writ petition was dismissed by High Court single bench as This notification was issued in the light of implementation of the 2013 Act. the Division bench of the High Court held while allowing the intra court appeal that the State of West Bengal failed to justify the decision to recall the vacancies and that it has acted in an arbitrary and unreasonable manner, and hence, it is being said to quash the Notification dated 17th August 2015. However, no final order appointing the respondent was issued by the State Authority and the application of the respondent was pending before the court. The Food and Supplies Department of the State of West Bengal issued a notification dated 17.08.2015 while cancelling the declaration of vacancies.

The Bench comprising of Justice S. Abdul Nazeer and the Justice Vikram Nath observed that the State endeavoured to enforce the statute and that there can be no estoppel against a statute, while recalling the vacancy notification.

The Food and Supplies Department of the State of West Bengal issued a notification dated 17.08.2015 while cancelling the declaration of vacancies.

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To clear wage arrears of sweepers within 8 weeks, the Supreme Court directs Jammu & Kashmir

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The Supreme Court in the case Dr. Kunzes Dolma and Anr. v. Mehraj-ud-Din Kumar and Ors observed and directed the Union Territory of Jammu and Kashmir to clear the wages of sweeper from March 2015, within 8 weeks as the arrears of sweepers sustaining at a monthly wage of as the minimum wage of sweeper is of Rs. 100/- per month (Rs. 3 per day).

In an order dated May 7, 2016 the LPA was preferred by the Department against which the High Court refused to entertain and passed the impugned order.

the Jammu and Kashmir High Court vide order dated May 7, 2016 confirmed the earlier order and again directed those minimum wages to be paid by the sweeper is to the extent of Rs. 4500 per month. Thereafter the order dated 06.11.2015 was not being implemented However in the contempt petition and since the Contempt Petition was preferred by the sweepers.

On 06.11.2015, the Single Judge of High Court directed in their favor for the release of the unpaid minimum wages.

the part time sweepers with wages of Rs 4500 each which has been done without any approval and authorization from any authority as accordingly in an order passed by the Chief Medical Officer The sweepers were aggrieved by the clubbing of plan grants into non plan which was done on the account.

For challenging the grant of same wage irrespective of the enhancement Part Time Sweepers in different Health Centers in District Kupwara by the then District/Block Level Officers who were entitled to monthly wages @Rs.100/- had approached High Court, a case before Jammu & Kashmir High Court.

It is being noticed by the bench in the impugned judgement that the sweepers continued to be paid meagre wages of INR 100 per month despite of repeated directions.

In an order dated 05.15.2019, the Top Court issued the directions while considering SLP assailing Jammu and Kashmir High Court’s, the top court further observed and refused to entertain the LPA.

The directions issued by the Top Court while considering an order dated May 15, 2019 as in the said order the SLP assaulted Jammu and Kashmir High Court’s while refusing to entertain the LPA furthermore the Court observed that the same was an abuse of the process of law.

In an order dated 15.05.2019, while considering SLP assailing Jammu and Kashmir High Court’s by which it further observed while refusing to entertain the LPA that the same was an abuse of the process of law, the directions issued by the Top Court.

The bench comprising of Justice BR Gavai and the Justice AS Bopanna observed and further directed for paying the monthly payment to the sweepers from the month of May, 2022 and which is to be paid a regularly without any break.

In an order dated 05.15.2019, the Top Court issued the directions while considering SLP assailing Jammu and Kashmir High Court’s, the top court further observed and refused to entertain the LPA.

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Supreme Court: Asks Comptroller of Examinations to examine students grievances about differences in marks allotted by CBSE exam

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The Supreme Court in the case Jay Dhande & ors vs Union of India & ors observed and directed the Comptroller of Examinations to reconsider grievances of the students and take appropriate decision as there is a difference in marks calculated by CBSE and the respondent School.

It was argued by the school that the CBSE is trying to cover up this inaccuracy and now the CBSE has used the opportunity to put the entire blame on the school.

According to the School Committee, it was submitted that the CBSE portal was an all-inclusive portal and the portal worked as per the algorithm/program as designed by CBSE and if there is a wrong or inaccurate moderation process, the onus and the responsibility of that lies with the CBSE and not the school, according to the School Committee.

Thereafter it was being argued that as per the CBSE instructions, the entire process was done precisely and as now the CBSE is putting the onus of its wrongs on the School as the School had no independent rule either in moderating or assigning the marks.

Further it was argued by the School Committee that the school did not have any power or any option to moderate or assign marks on its own and the school as mentioned in the CBSE portal, the school meticulously followed each and every instruction

It was further argued by the petitioner that the CBSE does not have any authority and the CBSE has changed the marks given by the School and the CBSE has awarded much less marks given by the school

In the present petition the main grievance is that the marks uploaded by CBSE are much less than the marks given by the school whereas the CBSE results that are uploaded reveal by the present petitioner school students is that according to their school, the school allotted them particular marks.

Further it being clarified by bench that it hasn’t expressed any opinion on the contentious issue.

No expressed opinion on the contention issue is being expressed by Bench, as bench clarified

In this case the main dispute is in regards with the marks allotted to the students as per 30:30:40 formula for class X, XI, XII respectively for the 2021 exams, where an alternative assessment is being restored by the Board in lieu of written exams due to.

The bench comprising of Justice AM Khanwilkar and Justice JB Pardiwala has asked to explain the flow of algorithm and software which provides for different deduction of different marks student-wise to take assistance of technical team by the Comptroller of Examination

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Supreme Court: Asks Petitioner On Plea Challenging Talaq-E-Hasan, To Mention Next Week

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The Supreme Court observed the Muslim personal law practice of Talaq-E-Hasan which was mentioned before a vacation bench for urgent listing. A petition was filed before the Supreme Court challenging the Muslim Personal Law Practise.

The petitioner argued before the court that the practise is arbitrary and is a violation of Article 14, Article 15, Article 21 and Article 25 of the Constitution and is therefore unconstitutional as the practise is discriminatory since only men can exercise the same and seeks a declaration. As it is not an essential practice of Islamic faith, according to the petitioner.

the Chief Justice of India NV Ramana had refused to grant urgent listing for the plea on 09.05.2022.

by pronouncing “talaq” once a month for three months, a Muslim man can divorce his wife as per Talaq-E-Hasan.

Ms. Anand submitted that as on April 19, first noticed was issued and Now second notice has been issued and he further submitted that we are challenging the proceedings and hence for Talaq E Hasan, a notice have been issued through lawyer.

The bench led by Justice Chandrachud further remarked that “Why under Article 32?”.

Ms. Anand submitted that the Talaq-E-Hasan was left out and the only issue of Talaq E Biddat was considered was considered in Shayra Bano.

Justice Chandrchud further remarked that there is no urgency and We will keep it on the re-opening day after vacations.

As it will be over, she has received the second notice on 05.19.2022 and on 06.20.2022.

She has received the second notice on May 19 and on June 20 it will be over”

on May 19 and on June 20 she has received the second notice and by the time it will be over as by that time everything third talaq will be given and everything will be over.

The bench led by Justice Chandrachud further remarked that there is no urgency as the first notice issued was on April 19 and wait for a period to come here.

Ms. Anand submitted further submitted that it is about a woman being abused and by reopening everything will be over.

On which Justice Chandrachud further remarked to take his chance and mention it next week.

The Vacation Bench comprising of Justice DY Chandrachud and the Justice Bela Trived contended that the petitioner has received the second notice of talq as the Public Interest Litigation petition filed by Senior Advocate Pinky Anand

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KERALA HIGH COURT: NO QUARRYING OR CONSTRUCTION WORK ON LANDS ASSIGNED FOR CULTIVATION

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The Kerala High Court directed the State Government to take steps for the resumption of such land, notify and exempt the provisions of required and further the court directed that no quarrying activities are permitted on the land assigned for cultivation in the case Raphy John v. Land Revenue Commissioner & connected matter.

It was being contended that through the rule the authorities had made a conscious decision not to grant or renew any quarrying lease if the land was assigned for a specific purpose. The revenue authorities would be incapacitated from verifying if the land was assigned for cultivation as the appellants had argued that if quarrying permits are sought for such lands. The amendment was brought in since it was impossible to distinguish between assigned lands in an appeal moved by the State while citing and the week after the judgment was delivered and lands sold to third parties, The impugned decision was, however, put on hold by the Court.

It was mandate by the impugned rule made that for granting or renewing any quarrying lease a Certificate is required from Village Officer and if such lands are assigned for any specific purpose, the village officer has to certify it.

It was being observed by the bench led by a Single Judge that since a quarrying lease was executed by the State and the bench further stated that the State has given sanction to conduct quarrying on assigned land, it can be presumed

In January 2018, the bench comprising of Single Judge had interfered with the amendment in the Kerala Minor Mineral Concession Rules brought in by the State to prevent quarrying on assigned lands and then sold it to third parties through assignees.

once an application for the same is received, the State may take a decision on the land classification, in furtherance with the decision made.

The order issued by the Revenue Department barring other constructions on agricultural land shall be strictly enforced was also being emphasized by the Bench And it has also been established under the Kerala Land Assignment Rules, 1964 and that there will be a violation of the Land Acquisition Act if there are any other construction activities on assigned lands and that assigned lands could not be used for any other purpose.

It has also opined that the Revenue authorities are empowered to take action to suspend all quarries that are currently operating on such lands the Court all the work assigned on lands including the other constructions and has also stayed of all resorts and petrol pumps while emphasizing that quarries are not allowed on such land.

A division bench comprising of Justice S. Manikumar and Justice Shaji P. Chaly, while ruling a single Judge Decision, in a batch of petitions moved by filed by the quarry owners and the Stated related to quarrying in lands assigned for rubber cultivation at the State’s capital.

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DIGITAL TRACKER WATCHES AND THE SURVEILLANCE CONUNDRUM: A DAILY DEHUMANISATION OF INDIA’S MUNICIPAL WORKERS

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The issue around digital privacy, or rather the lack of it, has been a hot topic of debate in India and has even made its way to the Parliamentary lobbies. In India, personal data is collected and stored by various merchants, big tech companies and other entities through the innumerable digital applications and devices that people use. From digital payment and ecommerce applications to social media platforms, personal data collection and storage is happening en masse, all while individuals still scramble to understand its repercussions. What’s worse — this personal, often sensitive information including financial and medical records, of millions of Indians is available for sale online through “data brokers” who have put a price tag to these records.

WHAT’S HAPPENING WITH MUNICIPAL WORKERS IN INDIA

Going a step further, there is an urgent need to look into this invasion of digital privacy from the lens of India’s municipal workers. Over the past few years, there have been several news pieces buried amid the bulk of eye-catching headlines, about municipal workers across several Indian cities being made to wear smartwatches to track their daily working hours. As per news reports, municipal corporations in cities like Nagpur and Chandigarh have made it mandatory for sanitation workers to wear GPS-enabled watches that are used to monitor their arrival at work, attendance record, number of hours clocked at work and the end of their shifts. The reports suggest that some of these watches have in-built cameras and microphones to allow the supervisors to monitor them by the minute. To make things worse, any discrepancy in the recorded number of hours at work is reportedly manifesting itself in the form of workers’ salary deductions. Thus, workers have been protesting the use of these digital trackers as being humiliating and violating their privacy in the garb of improving work efficiency.

INFRINGEMENT OF WORKERS’ RIGHT TO PRIVACY

The fact that sanitation workers are often unaware of the ramifications of surveillance of this kind, as is enabled by these digital trackers, goes to show how their informed and aware consent is not likely sought while implementing this technology. In this case in particular, the employer being the State, these rules amount to digital snooping on citizens by a government. This form of a ‘surveillance state’ directly impinges on citizens’ right to privacy, a fundamental right that flows from Article 21 of the Indian Constitution (K.S. Puttaswamy & Anr. v. Union of India & Ors.). While one can argue that this right is not absolute and there can be certain grounds for restricting the same (legitimate state interest, necessary and proportionate to achieve the interest, among other things), this is a justification that would hold up when a comprehensive and well-defined legislation is in place to regulate the collection and storage of such personal data of citizens.

EXISTING LEGAL FRAMEWORK ON PERSONAL DATA PROTECTION

At present, the only legislation that to some extent deals with the handling of personal data of individuals is the Information Technology (IT) Act, 2008, and the subsequent rules framed by the government. However, the coverage of this law is very limited in that it does not apply to collection and use of personal data by various entities (Section 43A of the IT Act 2000 recognises personal data dealings by a ‘body corporate’ and the compensation in that regard). It primarily focusses on information security as opposed to personal data protection. There exist other sectoral, subject-specific laws that regulate data dissemination in the respective segments, however, these are very narrow in their scope of protection. Further, while the Privacy Rules 2011 define what comes under the meaning of personal information and sensitive personal data, but how far the data collecting entities adhere to compliance standards and rules on storage and disclosure, grievance redressal and user safety is a big question mark.

The Personal Data Protection Bill, 2019, can be viewed as a step in the direction of chalking out the contours of digital privacy and collection, storage and dissemination of personal data of individuals in India. To begin with, the bill seeks to define what all would come within the ambit of ‘personal data’, and would govern the processing of personal data by governments, Indian and foreign companies. This is especially significant as it would plug the gaps that exist in the IT Act and rules subsequent thereof. Further, it would also outline the rights of individuals with respect to their personal data and the remedies available. However, it has been in the pipeline for some time, with objections having been raised over several aspects of the proposed law.

THE WHYS AND HOWS BEHIND THIS DIGITAL SURVEILLANCE

The recent mandate by city municipal corporations requiring workers to wear the digital trackers (Human Efficiency Tracking Systems, as they’re being referred to) takes on another hue when viewed from the lens of worker exploitation. Reports suggest that the trackers are being used to map the daily hours of every employee, and failure to wear the watch at all times or getting disconnected could result in salary deductions. Also, in the event of device malfunction, the workers would have to bear the brunt of the pay cut despite having clocked their daily hours. How and when such grievances would be addressed and dealt with is not very clear. Thus, workers’ woes take a backseat in the productivity and efficiency-focused surveillance work environment. Since municipal workers and sanitation staff employed by city corporations are usually not very tech-savvy or comfortable with tech-based gadgets, they are wary of how the system works. It can result in unnecessary anxiety regarding loss of earnings due to technical glitches.

Another issue is the alleged in-built cameras and microphones in these trackers. For workers who are not very well versed in such gadgets, the fear of being watched constantly could be debilitating, more so in the case of female workers. Their movement at work is tracked down to minutes, even seconds, linking the same to productivity targets and goals. Failure to meet these targets and minute-to-minute monitoring requirements could lead to reduction in the month-end salary payments. Automated workplace management is a concern that is prevalent across countries, and a parallel can be seen in the surveillance systems implemented by tech giant Amazon at its warehouses across the United States. The hazards of this surveillance system, like higher rate of injuries at workplace or even leaving workers without bathroom breaks, is similar to what is being witnessed in the case of India’s digitally-tracked municipal workers. The only major difference in the above-mentioned sets of scenarios is the place of occurrence and the entity engaging in worker surveillance. In India, the State is the data collector, often times undertaking this feat with the help of a third-party IT services firm. This makes the workers’ situation more precarious as their personal, sensitive information could be easily accessible to such contractual firms, especially in the absence of a data privacy law to regulate the same.

With increasing technological advancement and innovation, the cost of such surveillance methods has dropped, thus making it easier and more convenient for employers to adopt and implement. In contrast, this weakens the position of workers and the unions advocating for them as there is limited knowledge and legal recourse in this regard.

CONCLUSION

Thus, these GPS trackers are problematic on various fronts- they infringe individual privacy, operate in regulatory grey areas (as there is no proper oversight) and finally and most importantly, they constantly dehumanize the workers by treating them in a manner similar to bonded labour and robots. The human element of taking into account genuine issues being faced by employees or the context as to why they may not have been available on the tracking systems throughout the day (like poor internet connection, device malfunction, etc.) is completely ignored and disregarded.

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