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New Delhi / AFP
Indian tax authorities have threatened to seize Vodafone’s assets in the country if it does not pay a $2.1 billion tax bill, the company said on Tuesday, the latest twist in a long-running dispute.
The UK-based telecoms firm has fought with India’s tax office for years over whether it should pay tax on its $11 billion purchase in 2007 of the Indian mobile phone unit of Hong Kong-based Hutchison Whampoa.
The dispute, which came to symbolise the difficulties foreign firms face doing business in Asia’s third-largest economy, has been the subject of international arbitration since 2014.
Yet in a letter dated February 4 to Vodafone International Holdings BV, its Netherlands’ subsidiary, Indian authorities threaten to seize its assets in India if it does not pay 142 billion rupees ($2.1 billion).
“We can confirm that we have received a tax reminder from the Tax Department that also references asset seizures in the event of non-payment,” a Vodafone spokesman said in a statement.
“In a week when Prime Minister (Narendra) Modi is promoting a tax-friendly environment for foreign investors — this seems a complete disconnect between government and the Tax Department,” the spokesman said.
Modi gave a speech on Saturday to promote his government’s Make in India campaign, promising to end an opaque tax regime that deters foreign firms from doing business in the country.
Modi said his government had carried out a number of “corrections” on the tax front and promised not to resort to retrospective taxation.
“We are also swiftly working towards making our tax regime transparent, stable and predictable,” he said.
Vodafone says that because the 2007 deal was conducted outside of India, it should not pay tax on the transaction. But authorities say it owes money because it involved assets inside the country.
A senior official at India’s income tax department confirmed it had sent the request for payment.
“The letter… states that any overdue amount, even from an overseas company, may be recovered from any assets of the non-resident which are or may at any time come within India,” he said.
In India, Vodafone has become closely linked with tax battles, most obviously capital gains that the government says are due after its $10.9bn acquisition of Hutchison Essar.
Vodafone has more than 180 million subscribers in India and has been introducing 4G networks across major cities in recent months.