The outcome of the tax row between Vodafone and the Indian tax authorities will help determine how friendly India is, said Vodafone CEO Vittorio Colao in an interview with the Economic Times.
He added that he needs a positive outcome from the tax case…
The outcome of the tax row between Vodafone and the Indian tax authorities will help determine how friendly India is, said Vodafone CEO Vittorio Colao in an interview with the Economic Times.
He added that he needs a positive outcome from the tax case and stable regulatory environment to continue.
Several weeks ago, an Indian court ruled that authorities were allowed to seek a US$2.7bn tax bill from Vodafone International, a Dutch subsidiary of Vodafone, on its US$11.2bn purchase of Vodafone Essar (previously known as Hutchinson Essar) in 2007.
The British mobile operator recently filed a petition with the Bombay High Court against a new step by the Indian tax authorities to treat the company as an ‘agent’ of the seller during the acquisition.
“Vodafone contends that the key issue of jurisdiction (as to whether the Indian tax office can tax the transfer of a foreign company’s shares between two non-residents) is currently under appeal to the Supreme Court of India. Hence any action which seeks to treat Vodafone as an ‘agent’ of Hutchison is misguided and premature,” read the statement.
Experts in the industry fear that if the government decides to go ahead with the tax bill, other foreign firms might be deterred from making investments in the country. With 14 mobile operators in India, the sector is considered overcrowded. But Indian tax regulations are often seen as the main hurdle to consolidation since buyers have no clarity as to how regulations will change.
The Supreme Court said that the tax authorities would determine the potential tax liability linked with the acquisition of Essar by October 25.
In a separate interview with the Times of India, Colao however added the company was open to increasing its stake in Essar. The JV is 67% owned by Vodafone and 33% by Essar. Under Indian rules, foreign ownership in telecom companies is limited to 74%.
