India approves tax truce talks with Vodafone

Dylan Bushell-Embling
05 Jun 2013
00:00
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The Indian government appears ready to settle its long-running $2.5 billion tax dispute with Vodafone over the 2009 purchase of Vodafone India.

The Union Cabinet yesterday approved the conciliation proposal that has been put forward by the nation's finance ministry, Indian Expressreported.

If the government accepts the proposal, it will be put to parliament for a vote, and then taken to Vodafone. Then the company and the finance ministry would enter conciliation talks.

Details of any concessions to be offered are yet to be released, but Vodafone has previously indicated a willingness to pay the original tax bill, if interest and penalties are waived.

The government has already rejected a conciliation offer from Vodafone to settle the dispute, on the grounds that it doesn't conform with Indian tax law.

India's tax laws will again need to be amended before the finance ministry's conciliation proposal can be enacted.

But a crucial difference between Vodafone's and the Finance Ministry's conciliation proposal is that Vodafone's would have been arbitrated through international law, while the state proposal involves Indian laws.

Vodafone and the government have been battling it out over the tax claim for years. In 2012, Vodafone won a Supreme Court victory declaring that India's Tax Department had no authority over Vodafone's 2009 purchase of its Indian unit from Hutchison, as the transaction took place between two offshore entities.

But the government responded by retroactively changing India's tax law, and then slapping Vodafone with a fresh demand. With interest and penalties added, the demand totalled 140 billion rupees ($2.47 billion).

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