What are Retrospective Taxes? The government taxes certain p | Credclub

What are Retrospective Taxes?

The government taxes certain products, items, or services and deals made by companies pertaining to a time prior to the date on which the law taxing them was passed.

Why are These Taxes Enacted?

These taxes are introduced by countries if the authorities feel their tax policies were taken advantage of by certain companies. Think of it as a policy change caused by second thoughts.

Retrospective amendments are at times added to taxation laws by governments to clear any room for doubts pertaining to them, however, this can end up being detrimental to companies who interpret said tax rules in a different light. This alternate interpretation could knowingly or unknowingly take advantage of the loophole available.

Retrospective taxes have most notably been applied to Vodafone who bought a majority stake in Hutchison Whampoa in 2007 in India.