UK-based cellco Vodafone Group has said that the US$2.5bn tax bill it faces in India could be doubled, according to the Financial Times.
CFO Andy Halford was quoted saying that Indian authorities have threatened to impose penalties for non-payment,…
UK-based cellco Vodafone Group has said that the US$2.5bn tax bill it faces in India could be doubled, according to the Financial Times.
CFO Andy Halford was quoted saying that Indian authorities have threatened to impose penalties for non-payment, potentially bringing the liability to US$5bn.
The dispute with the tax authorities relates to Vodafone’s original acquisition of Hutchison Telecommunications’ stake in Hutchison Essar for US$11.2bn in June 2007. Hutchison Essar, a telecoms JV, subsequently became Vodafone Essar.
In September 2010, the Bombay High Court ruled that the authorities were allowed to levy a US$2.5bn capital gains tax bill from Vodafone International relating to the 2007 deal.
Vodafone appealed this decision in the Indian Supreme Court, with the company arguing that as a buyer rather than a seller, Vodafone could not make a capital gain. It also said that the deal took place between two non-Indian companies in the Cayman Islands.
The Financial Times explained that Vodafone has set aside US$2.5bn in an escrow account but has made no special provision for the liability as it believes it will win the case.
Vodafone has met some difficulties in India of late, particularly in the wake of the 2G scam.
Recently, Vodafone Essar sent a letter to telecom minister Kapil Sibal asking him to ensure that the new telecom policy will help create a fair and transparent regulatory environment. More specifically, the company is seeking clarifications on spectrum allocation and usage charges.