2016 Vodafone Has Hefty Tax Bill

While everyone is well-aware that tax season is upon us; it appears that one large conglomerate is to be a bit shocked when their tax bill arrives… The legendary Vodafone (who is one of the largest corporate investors in India) is likely to be hit with quite a hefty bill from India who recently sent a tax renewal notice for £1.4bn (or 14,200 crore) from Anil Sant, the deputy commissioner of income tax.

Since 2007, Vodafone (this is a link to our call connection service, official information and freephone can be found on the official website) has been warding off the Indian tax authority following the merging of the Hong Kong-based Indian mobile unit, Hutchison Whampoa for $11bn. Recently, the tax department of India had sent the renewal notice and also was sure to alert Vodafone that their assets would entirely be seized, if they failed to pay the tax penalty. According to the letter sent to Vodafone, it was noted that any existing amounts that are past due, including from companies overseas, may in turn be collected “from any assets of the non-resident which are, or may at any time come, within India.” Vodafone, however begs to differ. They claim that they owe no such taxes citing that the completed transaction was in fact completed offshore. In other words, Vodafone is stating that India simply cannot levy taxes due to the fact that the transaction was made between two non-Indian companies outside of the country, as Vodafone is based in the United Kingdom and Hutchison Whampoa is based in Hong Kong.

Tax correspondents find the situation intriguing to say the very least; stating that the notice that was sent to Vodafone from the Indian tax department has yet again sparked controversy based upon retrospective taxation. Vodafone additionally went on to vocalize that there is a “complete disconnect between the government and tax department” and went on to address that that this tax bill came at a time when the Prime Minister is attempting to persuade foreign companies to invest in India free of the fear of regressive taxation.

In 2012, the top court of India ruled in favour of Vodafone, however governmental laws were changed later in the year of which permitted companies to be taxed retrospectively. This change in laws of course was tremendously criticised by countless investors. However, when Prime Minister Narendra Modi and Finance Minister Arun Jaitley rose to power in May of 2014, there has in turn been a repeated assurance to foreign investors of a trustworthy and stable tax regime.

In a recent statement, Vodafone declared that India had assured that all tax conflicts “would be resolved through existing judicial process,” adding that “in a week when Prime Minister [Narendra] Modi is promoting a tax-friendly environment for foreign investors [through Make in India week] – this seems a complete disconnect between government and the tax department.”

It will most certainly be an interesting turn of events as Vodafone attempts to take on the tax department of India, and regardless of success or lack-there-of, the end result will be sure to make some headlines.