India slaps Vodafone with $600M tax bill - report

India slaps Vodafone with $600M tax bill – report

19 DEC 2013

India’s tax department has issued Vodafone a tax demand notice of INR37 billion (around $600 million) related to its acquisition of Hutchison Telecommunications in 2007, according to a report by the Economic Times (ET).

The tax bill, which includes interest, has been sent to Vodafone India Services Private Limited. According to the report, Vodafone has 30 days to comply or make an appeal.

Vodafone has always maintained it is not liable for tax payments on the Hutchison transaction.

A Vodafone spokesperson, quoted by ET, said the operator would file an appeal before the tax appeal tribunal as soon as possible. The total size of Vodafone’s outstanding tax bill in India, if the government gets its way, could be as much as INR200 billion, according to the report.

It has been a roller-coaster tax ride for Vodafone in India.

The country’s Supreme Court, after examining details of the Vodafone-Hutchison transaction, announced in January 2012 that no tax was due.

However, the Indian government subsequently changed the law to introduce retrospective taxation rules.

In document published this week, giving a breakdown of Vodafone Group’s tax and “economic contributions” on a country-by-country basis, India’s retrospective tax laws are heavily criticised.

“Those rules, which were back-dated to 1962, were designed to require taxes to be paid retrospectively which, as the Supreme Court had concluded, could not be levied against Vodafone under any reasonable interpretation of the evidence or the law,” stated Vodafone.

The Indian government, reacting to fears that new tax laws could undermine business confidence in the country, commissioned an independent inquiry – led by the economist Parthasarathi Shome – to recommend a way forward.

The Shome Committee, according to Vodafone, concluded that retrospective tax rules should be introduced only in the ‘rarest of rare’ cases, and that, if applied to capital gains tax cases, the authorities should pursue the seller, not the buyer. (Vodafone was the buyer in the Hutchison case.)

There may be room for compromise.

While Vodafone maintains no tax is due on the 2007 acquisition, it has told the government it is willing to explore the possibility of a “mutually acceptable solution”.

Vodafone further points it has become one of India’s largest investors, spending more than £12.8 billion in building its business in the country since 2007.

The operator is also one of India’s largest taxpayers.

In its country-by-country breakdown covering the financial year ended 31 March 2013, Vodafone said its direct and indirect contributions to Indian public finances exceeded £1.7 billion.

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Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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