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Vodafone offers ‘conciliation’ for Indian tax dispute

Vodafone is reportedly offering to resolve its long-running tax dispute with the government of India.

The country’s financial services secretary Hasmuskh Adhia has tweeted that Vodafone has “expressed its desire to go for conciliation for its tax disputes”, which began in 2007. Indian tax authorities maintain that Vodafone owes a tax bill of INR200 billion ($3.01 billion) related to its $11 billion acquisition of Hutchison-Essar, now Vodafone India.

Adhia noted that preliminary discussions between Vodafone and the government regarding the resolution of the dispute had already taken place, although no terms had yet been agreed to. Reportedly, the government will consider the issue settled if Vodafone pays the originally requested tax bill of INR80 billion, waiving the interest and fines that have since been accrued.

In October the Bombay High Court ruled in Vodafone’s favour, dismissing the Income Tax Appellate Tribunal’s declaration that an INR85 billion ($1.31 billion) bill levied against Vodafone was lawful. The tax authorities had imposed this bill following a transfer pricing case in 2008.

While this provided Vodafone with some respite, the group faces a separate legal challenge regarding capital gains from its acquisition. The case is going into international arbitration. Meanwhile, Vodafone has reportedly enlisted investment bank NM Rothschild to help it prepare an IPO for its Indian unit, “subject to market conditions”.

The saga of Vodafone’s tax dispute has soured attitudes of foreign investors towards India – a situation that Narendra Modi’s government is attempting to reverse be restructuring corporate tax laws. 

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