In this Tax Stories episode I chat with Porus Kaka who is a tax world celebrity, a former president of IFA globally, now Honorary President, the 1st IFA president from Asia in it’s ~85 years’ history. Porus is a Senior Advocate (India) and a Barrister (England and Wales), a trustee at IBFD, completed his LL.M from Harvard Law School. His specialisation is TP litigation, direct and international tax. He is ranked by Chambers & Partners consistently as one of India’s leading Senior Tax Advocates and quoted as “The International Face of Indian Tax Practice”. Also the International Tax Review recognised Porus as one of India’s Leading Tax Counsels.

We need humour, but..

We started the chat about jokes that heavy tax topics need jokes now and then to keep the audience alive, but the difficulty now is that it’s dangerous to joke about more and more topics, especially if you are IFA president.

Strong role models

Porus father was an advocate so he new very early that he wants to be a tax lawyer as well. Also the senior Porus was lucky to be able to work for one of the leading individuals in India early on in his career. At the same time (1991/92) India opened up to the world, and it gave an opportunity to practice internationally.

Senior Advocate

It was interesting to learn that in India Senior Advocates are appointed by judges and they are supposed to say what is right even if it’s not in the best interests of the client. The Chambers of Porus Kaka – although it’s lead by a Senior Advocate, the junior advocates work independently on their own cases.

Ways to develop a tax litigation practice

Just like in the previous Tax Stories episode Pekka Puolakka told us, also Porus confirmed the same view that there are no shortcuts – a great volume of work is needed. Advocates also need to earn trust by judges that you are competent to be successful in the courts. Porus also learned from his father that at least ½ h a week one needs to spend reading aloud to develop the public speaking (diction) skills.   

Transfer pricing

TP came to India in 2002 when everybody was thrown into a swimming pool and everyone dealing with TP learned how to swim in a relatively short time. This developed TP litigation practice where “one can find in India’s judicial orders perhaps at least one judgment on every troublesome issue under the sun”. Porus thinks that OECD TP Guidelines become more subjective and more favourable to the Revenue. He has also mentioned a ruling by an Australian court in 2020 that says that the Guidelines are sometimes “very highly generalised and… frustratingly opaque”. We discussed what’s behind those views.

Meeting Dalai Lama

Porus tried to meet Dalai Lama many times until one day the dream came true. Dalai Lama had such an aura that the whole day Porus after the meeting was just happy. They spoke about Porus and religion (Zoroastrians), and his customs. BTW, Dalai Lama has his Twitter account: @DalaiLama.

Vodafone tax case

Porus briefly expressed that Vodafone tax case might be an expensive (USD 2 bn, incl. USD 5.5 mil. in legal fees), but good lesson for India regarding retroactivity. Vodafone won an International arbitration tribunal in The Hague. In brief, India imposed a tax payment retroactively, but Vodafone successfully proved it was in breach of the investment protection treaty. In 2012, India’s top court ruled in favour of the telecom provider but the government changed the rules to enable it to tax deals that had already been concluded. To reduce future arbitration claims, India has ended such agreements with over 50 countries and is working on a new law (in 2020) to protect foreign investors by offering relief from possible policy changes even as it upholds the right to tax them.

Pillar 1

With Pillar 1 it is clear that companies nowadays can earn without a permanent establishment. Therefore Porus is a bit surprised how little debate there currently is on Pillar 1. However, if there is no global solution the fear is that countries with their own Digital services taxes being outside the tax treaties will create a system that moves from non-taxation to double taxation. The other tax reality Porus was stressing is that with every tax treaty countries actually give up a bit of their sovereignty.  

~75% of international tax & TP cases globally come from India

India seems to be quite advanced in tax theory thought development. This could be a good hint to the tax community from around the world when they need additional ideas and precedents for their cases.