Vodafone continues Indian tax dispute

Vodafone continues Indian tax dispute

UK’s Vodafone is continuing negotiations over its tax dispute with India, after the country’s new Prime Minister Narendra Modi said the claims will “naturally reach their logical conclusion”.

Vodafone and India have been involved in a multi-billion dollar tax row for more than six years, following Vodafone’s acquisition of Hutchison Whampoa’s mobile unit in 2007.

In 2012, the Indian government saved Vodafone from paying $2.9 billion in tax after ruling that its $11 billion acquisition was non-taxable. Later that year, tax legislation was amended, and Vodafone’s case was reopened.

Firms such as General Electric and SABMiller were also hit by the rule change, and although many expected the government to discontinue such retrospective taxation, the country’s finance minister, Arun Jaitley, said this week that it was India’s “sovereign right” to pursue the fees.

Jaitley attempted to assure investors that cases would be treated fairly, saying that it would not “bring about any change retrospectively which creates a fresh liability”, as well as announcing a specialised committee for scrutinising new retrospective tax claims.

Vodafone has since issued a statement confirming that it would continue to pursue the international arbitration process.

“From the outset we have maintained that there was no tax to pay – a view upheld by India’s Supreme Court,” the statement read. “The retrospective law in any case concerned tax on the gain made by Hutchison: Vodafone, as the buyer, clearly made no capital gain whatsoever.”

Vodafone reportedly attempted to resolve the issue with the Indian government for a year following the 2012 tax legislation, but all talks were called off.

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