India Asks Vodafone to Pay $2.1 Billion Tax Bill or It May Face Asset Seizures
Vodafone should pay $2.1 billion tax bill, according to letter
Dispute traces back to 2007 purchase of Hutchison business
India said it may seize Vodafone Group Plc’s assets in the country if the company doesn’t pay a disputed 142-billion-rupee ($2.1 billion) tax bill that’s still undergoing international arbitration proceedings, according to a copy of the notice that was sent to the company this month.
Anil Sant, deputy commissioner of income tax, informed the company’s Vodafone International Holdings BV Dutch unit of its dues in a letter dated Feb. 4, according to the document, a copy of which was seen by Bloomberg News. Vodafone confirmed it received a tax reminder which references asset seizures in the event of non-payment. A representative at India’s tax department declined to comment.
Any overdue amounts, even from overseas companies, may be recovered "from any assets of the non-resident which are, or may at any time come, within India," according to the letter.
Vodafone has been fighting Indian tax authorities for years over its purchase of billionaire Li Ka-shing’s mobile-phone business in the country during 2007 in a case that analysts have said may influence foreign investors’ perceptions about India.
“The tax authority is not privy to arbitration, and they will act against a company to recover the dues owed to them,” said Shardul J. Thacker, a partner at law firm Mulla & Mulla & Craigie Blunt & Caroe. “The tax authorities do have a lot of powers and can seize assets and impose penalties on defaulters.”
Shares of Vodafone rose 0.7 percent to 211 pence at the close in London.
It’s not immediately clear what the government’s next steps would be if Vodafone were to decline the payment request.
The dispute traces back to Vodafone’s $11 billion acquisition of a 67 percent stake in the mobile-phone business owned by Hutchison Whampoa, now part of CK Hutchison Holdings Ltd. While Vodafone has said it doesn’t owe the Indian government money because the transaction was conducted offshore, Indian authorities have sought to collect taxes on the deal because it involved the assets in the country.
Vodafone, the second-largest mobile carrier in India, began international arbitration proceedings on the tax bill in 2014. It’s the biggest of three disputes Vodafone has had with India’s government under Prime Minister Narendra Modi’s predecessor.
“The Indian government stated in 2014 that existing tax disputes, including ours, would be resolved through existing judicial process,” Vodafone said in an e-mailed statement. “In a week when Prime Minister Modi is promoting a tax-friendly environment for foreign investors -- this seems a complete disconnect between government and the tax department.”
The other disputes involved the valuation of international transactions -- a case that Vodafone won at the Bombay High Court -- and a separate ruling in October, whereby the court ruled that Vodafone didn’t owe as much as 85 billion rupees in back taxes.