Vodafone executives meet government, want to settle Rs 20,000 crore tax dispute
NEW DELHI: NEW DELHI: Vodafone, which has served an arbitration notice on India in connection with its Rs 20,000 crore tax dispute, sought to reach out to the new government as the companies executives called on senior finance ministry officials on Friday.
A finance ministry official said the company was keen on conciliation and settling the tax dispute outside the judicial process. The government has to appoint an arbitrator before June 15 following the arbitration notice. The meetings come in the backdrop of the new Narendra Modi-led government promising a stable tax regime.
The new law minister Ravi Shankar Prasad had declared soon after taking over that changing the law with retrospective effect should normally be avoided as India needs foreign investment. The issue goes to the heart of the Vodafone case, in which the law was changed to apply to an old transaction. Vodafone’s external affairs director Mathew Kirk met finance secretary Arvind Mayaram and revenue secretary Rajiv Takru.
The company’s representatives said they were keen to invest further in the Indian market, according to Mayaram. “They came to talk to me about their plans for future investments,” he said.
“They are very enthused (by the) positive attitude of new government. They are happy with their operations in the country. They say it’s a very profitable operation.” In its last few key decisions, the former United Progressive Alliance government cleared the withdrawal of the conciliation offer to Vodafone, putting the ball firmly in the court of the new government to take an independent view on this high-profile tax dispute and the retrospective tax law that prompted its escalation.
Vodafone’s notice for international arbitration is under the India-Netherlands bilateral investment treaty. The origins of the dispute lie in the decision of the Indian tax authorities, a few years ago, to impose a principal tax liability of Rs 8,000 crore on Vodafone for failing to deduct tax on its $11-billion payment to Hutchison Telecommunications International for the acquisition of Hutchison Essar (now called Vodafone India).
Vodafone moved court saying that the deal took place overseas and couldn’t be taxed, a claim that was endorsed by the Supreme Court in 2012. Soon after that the government changed the law to allow it to claim tax retrospectively on such deals.
The law has been criticised globally and is seen as a major dampener on sentiment by foreign investors and industry bodies in the country.