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Vodafone, India To Talk Tax

by Mary Swire,, Hong Kong

15 January 2013

Representatives of the Indian tax authorities are set to meet with with telecoms giant Vodafone this week in an effort to resolve their long running tax dispute.

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. The government was also ordered to repay the USD496m deposit paid by Vodafone in late 2010, plus 4% interest.

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 disputed taxes. In September, Vodafone set aside USD2.2bn for the payment of its Indian tax liabilities, and announced that it may be willing to settle the bill, were any interest and penalty charges waived.

Last week, Vodafone confirmed that it had received a "reminder" from the authorities, to which it replied re-asserting its claim that no tax is payable on the transaction. Vodafone did, however, invite government ministers to meet with its representatives to discuss the matter and find a solution.

It appears that the government has now taken Vodafone up on its offer. According to a senior finance ministry official, the revenue secretary, Sumit Bose, together with Poonam Kishore Saxena, chairman of the Central Board of Direct Taxes (CBDT) will be present at the talks.

TAGS: compliance | tax | business | tax compliance | India | interest | law | tax authority | multinationals | controlled foreign corporations (CFC) | penalties | telecoms

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