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End In Sight For Vodafone's Indian Tax Dispute

by Mary Swire,, Hong Kong

31 January 2013

India's tax authorities are to hold a third rounds of talks with telecoms giant Vodafone in an effort to resolve their protracted dispute, Finance Minister P. Chidambaram confirmed in a series of interviews.

Vodafone appeared to have won its battle in January, 2012, when India's Supreme Court ruled that the company was not liable for a USD2.2bn bill in back taxes and penalties in connection with the acquisition of mobile phone company Hutchinson Essar in 2007. However, the subsequent introduction of the government's controversial Finance Bill raised concerns over whether retrospective changes to the Income Tax Act would allow the government to recover the taxes in question.

In September, Vodafone set aside USD2.2bn for the payment of its Indian tax liabilities, and announced that it could be willing to settle the bill, were any interest and penalty charges waived. Earlier this month, Vodafone confirmed that it had received a "reminder" from the authorities. Although the company re-asserted its claim that no tax is payable on the transaction, it did offer to meet with the government to discuss the matter and find a solution.

Chidambaram told the Financial Times that he was confident that the issue would be resolved, and that he was aiming to settle the dispute within a comparatively short time frame. When asked whether the matter could be dealt with within a month, he replied, "I am trying to resolve it even sooner than that." Chidambaram reiterated the message in a television interview with Reuters, during which he also stressed that Vodafone too is "keen to resolve the matter."

TAGS: compliance | tax | investment | business | tax compliance | India | foreign direct investment (FDI) | ministry of finance | tax authority | multinationals | controlled foreign corporations (CFC) | penalties | telecoms

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