Vodafone ordered to pay $2 billion in taxes by Indian government

Nathan Andrada – Fourth Estate Cooperative Contributor

London, England, United Kingdom (4E) – Vodafone Group PLC received yet another notice from Indian officials saying that it owes the government more than $2bn in taxes for its acquisition of a stake in a local firm, according to Vodafone on Saturday.

The British telecommunications giant may take the matter to an international arbitration tribunal after the Indian government once again demanded that the company pay tax payments of over $2bn in a deal struck in 2007.

Vodafone said that the notice from the government did not mention of a deadline, and it has responded by saying it has no obligation to pay the taxes from the transaction.

The Indian government evoked Section 201 of the Income-Tax Act, saying Vodafone is liable to pay 14,000 crore rupees including interest for the delayed payment, according to the government.

The government claims that Vodafone needs to pay taxes for the $11.2bn purchase of 67 per cent stake in Hutchison Whampoa Ltd.’s India-based operations. The company, which has been renamed to Vodafone India Ltd., has the third-biggest customer base in the country.

Vodafone is planning to contest the decision under the India-Netherlands Bilateral Investment Protection Agreement that guarantees the promotion and protection of investor interest of both countries in either territories.

In January 2012, Vodafone received a favorable ruling from India’s Supreme Court when it did not require the company to pay tax on the transaction since the deal was between two foreign firms—Vodafone, whose unit is Dutch-owned, and Hutchison, which is registered in the Cayman Islands.

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