India’s Supreme Court has asked Vodafone to pay a Rs 25bn (US$554m) deposit within three weeks, as part of a US$2.5bn tax dispute over the Vodafone Essar acquisition. This will be paid back to Vodafone if the company wins the court case. The Dutch…
India’s Supreme Court has asked Vodafone to pay a Rs 25bn (US$554m) deposit within three weeks, as part of a US$2.5bn tax dispute over the Vodafone Essar acquisition.
This will be paid back to Vodafone if the company wins the court case.
The Dutch subsidiary of British mobile operator Vodafone was also told to submit bank guarantees worth Rs 85bn (US$1.9bn) within eight weeks. The final date for an appeal hearing has been set for 24 February.
In an email to TelecomFinance, a spokesman for Vodafone wrote: “After today’s hearing, Vodafone looks forward to the matter being heard in full on the 24 February, when the central issue of jurisdiction will be thoroughly reviewed by The Supreme Court. (…) ?Vodafone is confident that there is no tax liability resulting from this transaction and all the tax and legal advice it has received remains consistent with this view.”
Several weeks ago, an Indian court ruled that authorities were allowed to seek a tax bill from Vodafone International on its purchase of Vodafone Essar (previously known as Hutchinson Essar) in 2007.
But the company wrote in the statement that “Vodafone continues to believe that it is not liable for any tax on this transaction involving the transfer of a company outside of India. Further, Vodafone was the acquirer and not the vendor and has made no gain on the transaction. In this ‘test case’, the tax authority is attempting to interpret Indian law as it has never been interpreted for the past 50 years, and this interpretation also goes against internationally recognised tax norms.”
The hearing of Vodafone’s tax case was originally scheduled for October 25 but was then deferred to 15 November.
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.
In a recent interview with local newspapers, Vodafone CEO Vittorio Colao said that the outcome of the tax row between Vodafone and the Indian tax authorities will help determine how friendly India is, and that he would need a positive outcome from the tax case and a stable regulatory environment to continue investing in the country.
