Vodafone set to escape pounds sterling 1.6BN Indian tax bill [Financial Mail on Sunday, London]
(Daily Mail (London, England) Via Acquire Media NewsEdge) Jan. 13--TELECOMS giant Vodafone could escape paying at least part -- or even all -- of a pounds sterling 1.6 billion tax bill in India after it emerged that New Delhi is planning to amend the legislation that led to the demand.
The Indian government is understood to be preparing a change to its Finance Bill, which commentators believe could result in a waiver of the entire tax bill, or at least to the cancelling of interest and penalty charges.
The development comes ahead of David Cameron's visit to India next month to discuss investment ties. The Prime Minister believes that Britain and India are on course to double bilateral trade by 2015.
New Delhi claims that Vodafone is liable for the back taxes after its $11 billion (pounds sterling 7.3 billion) 2007 deal to acquire Hong Kong-based Hutchison Whampoa's Indian telecoms assets.
Vodafone International, a Dutch subsidiary of the group, bought a majority stake in CGP Investments Ltd, a Cayman Islands company that held the Indian assets of Hutchison.
Vodafone has always maintained that it did not owe the Indian government tax on the transaction since the deal took place between two foreign entities.
A year ago the Supreme Court of India ruled in favour of Vodafone and against the government.
However, in a move that caused outrage among foreign investors, the government introduced a Finance Bill last year to allow it to tax cross-border deals dating back to 1962.
But a report commissioned by the government last year recommended that past mergers and acquisitions should not be taxed.
The government was heavily criticised by the business community for introducing the rules at a time of sharp economic downturn when the country was trying to encourage foreign investment.
Vodafone, under chief executive Vittorio Colao, has also argued that New Delhi's demands are in breach of the India-Netherlands Bilateral Investment Treaty, which guarantees fair treatment of investors.
Vodafone declined to comment.
Meanwhile, Vodafone sources said there were no plans for talks with Verizon, its partner in the lucrative Verizon Wireless operation in the US. Verizon has indicated that it might wish to buy the British company's 45 per cent stake in the business. The deal could be worth pounds sterling 600 million.
Chief executive Lowell McAdam said he would be interested in buying the stake and had the financial flexibility to do so.
McAdam has said as much before, but City analysts suggested that he was trying to take advantage of Verizon Wireless's strong performance in comparison to Vodafone's weaker performance in Europe.
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