<h1>The Taxation Laws (Amendment) Bill, 2021&nbsp;</h1> <img src="https://sunyaias-resources.s3.ap-south-1.amazonaws.com/content/f00fddd9-303e-11ec-b926-2904f31f58d4.png"><h2> </h2><h2>Context:</h2> <ul><li>The government has recently introduced the Taxation Laws (Amendment) Bill, 2021, in Parliament.&nbsp;The bill seeks to nullify the contentious&nbsp;retrospective tax law&nbsp;by amending the&nbsp;Income Tax (IT) Act&nbsp;of 1961 and the Finance Act of 2012</li></ul> <h2>Background:</h2> <ul><li>The retrospective tax law&nbsp;was passed in 2012 following a Supreme Court verdict in favour of US-based Vodafone.</li></ul> <ul><li>It was&nbsp;introduced after an amendment to the Finance Act&nbsp;enabled the tax department to&nbsp;impose retrospective capital gains tax&nbsp;for deals —&nbsp;involving the transfer of shares in foreign entities located in India — after 1962.</li></ul> <ul><li>Last year, India lost a case in an international arbitral tribunal at The Hague against taxing&nbsp;Cairn Energy Plc and Cairn UK Holdings Ltd.</li></ul> <h2>Significance:</h2> <ul><li>The move attempts to end long-pending disputes with foreign firms such as Vodafone Plc.</li></ul> <ul><li>The move is also investor-friendly, and also brings to an end messy litigation and arbitration, especially with Cairn, which has seen the company staking claim to India’s overseas assets.</li></ul> <h2>Retrospective Taxation:</h2> <ul><li>It allows a country to pass a rule on taxing certain products, items, or services and deals and charge companies from a time behind the date on which the law is passed.</li></ul> <ul><li>Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.</li></ul> <ul><li>Retrospective Taxation hurts companies that had knowingly or unknowingly interpreted the tax rules differently.</li></ul> <ul><li>Apart from India, many countries including the USA, the UK, the Netherlands, Canada, Belgium, Australia, and Italy have retrospectively taxed companies&nbsp;</li></ul>