Vodafone case to be concluded before changes are made to tax laws

5 Mar 2013

India will not look to secure parliamentary approval to implement controversial rules regarding retrospective taxation until it concludes a long-standing dispute with UK-based Vodafone Group, Reuters quotes finance minister Palaniappan Chidambaram as saying. Vodafone is at loggerheads with the Indian government over a USD2 billion tax bill relating to its 2007 acquisition of majority control of Indian cellco Hutchison Essar (now Vodafone India). As noted by TeleGeography’s GlobalComms Database, in January 2012 the Supreme Court ruled in Vodafone’s favour, saying that the group was not liable for the tax bill. Shortly afterwards however, the government proposed alterations to tax legislation specifically regarding offshore mergers and acquisitions that result in the transfer of Indian assets with retrospective effect. Vodafone threatened international arbitration in April last year over the charges, but after the government’s stance softened in October 2012 following a review of the proposed legislation, the group has proffered a conciliatory letter.

Chidambaram has asked the Cabinet to consider Vodafone’s offer, noting that the conciliation process takes less time than arbitration. The finance minister added that his department will not seek parliamentary approval for the changes to tax legislation until the Vodafone case is concluded: ‘Unless we resolve the Vodafone case, I can’t go to Parliament with the amendments to the retrospective clause.’

India, Vodafone Group, Vodafone India