Vodafone’s £1bn Indian tax bill row: peace talks about to break down
India’s finance ministry is preparing to seek the cabinet’s approval to withdraw conciliation proceedings with the UK telecoms firm.
Vodafone, the world’s second-largest mobile operator by subscribers, entered India in 2007 by acquiring Hutchison Whampoa’s mobile phone assets. It is contesting a tax bill of about 112bn rupees (£1.1bn) relating to the acquisition.
India plans to pull out of talks with Vodafone over a $2bn (£1.2bn) tax dispute, in a move that will prolong a row that is already more than six-years old and increase uncertainty among investors in Asia’s third-largest economy.
India’s finance ministry is preparing to seek the cabinet’s approval to withdraw conciliation proceedings after Vodafone wanted a separate tax dispute to be made part of the deal, according to an internal government note.
Policy uncertainties in India have unsettled investors, with tax claims on foreign companies being one of the major concerns. IBM, Royal Dutch Shell and Nokia are among foreign firms contesting local tax claims.
Vodafone, the world’s second-largest mobile operator by subscribers, entered India in 2007 by acquiring Hutchison Whampoa’s mobile phone assets. It is contesting a tax bill of about 112bn rupees (£1.1bn) relating to the acquisition.
The Indian supreme court ruled in 2012 that Vodafone was not liable to pay any tax over the transaction. But the government changed the rules, allowing it to make retroactive tax claims on completed deals and drawing criticism from business groups.
The Indian cabinet gave the go-ahead for conciliation talks with Vodafone last June. While formal talks are yet to begin, Vodafone and Indian government representatives had a series of meetings last year.
Vodafone had insisted that the conciliation talks included a transfer pricing dispute involving a unit offering call-centre services to group companies.
The government disagreed leading to its move to scrap the talks, according to the note.
“The matter related to Vodafone will be taken to the cabinet, and the cabinet will take a final decision,” D.S. Malik, a finance ministry spokesman, told Reuters. Vodafone has not been informed as the plan has yet to receive cabinet approval, sources with knowledge of the development said. Vodafone declined to comment.
Vodafone, whose Indian mobile services business is the country’s second-biggest by users and revenue, has repeatedly said that it was not liable to pay any tax over the Hutchison acquisition.
Vodafone will likely appeal to an Indian court and may reopen the international arbitration option if the conciliation talks are scrapped, experts said.
Credit: The Guardian
