Huge Tax Bill

[Hafizzz]

India slaps Vodafone with 2.53 bln dollar tax demand
India slaps Vodafone with 2.53 bln dollar tax demand - Yahoo! Asia News



NEW DELHI (AFP) - – India slapped a 2.53-billion-dollar tax bill on British cell phone giant Vodafone on Friday over its 2007 purchase of an Indian mobile company and demanded payment within 30 days.

The formal demand is the latest development in Vodafone's bitter row with Indian tax authorities over its 11.1-billion dollar purchase of a 67-percent stake in Hong Kong-based Hutchison Whampoa Ltd's Indian mobile unit.

Indian tax officials have call the long-running dispute a "test case."

It is being closely watched by international investors with experts saying the case could have implications for big-ticket purchases of Indian firms by other foreign companies.

"The income tax department today issued an order raising a tax demand of 112.17 billion rupees (2.53 billion dollars) on Vodafone International Holdings BV," owned by Vodafone Group Plc, the tax office said in a statement.

"The tax demand is to be paid within 30 days," the statement said.

The bill follows a lower court ruling last month ordering Vodafone to pay taxes on the acquisition. India's Supreme Court is slated to set a date for a hearing on the company's appeal next Monday.

The tax demand brought a stinging response from Vodafone, which accused tax authorities of "attempting to interpret Indian law as it has never been interpreted for the past 50 years."

"This interpretation also goes against internationally recognised tax norms," a Vodafone spokesman said.

Vodafone "strongly disagrees with the tax calculation" and believes "it is not liable for any tax on this transaction involving the transfer of a company outside of India," the spokesman said.

Vodafone maintains Indian law did not require it to deduct tax because the deal took place in the Cayman Islands and both buyer and seller were foreign.

"Further, Vodafone was the acquirer and not the vendor and has made no gain on the transaction," the spokesman noted.

Earlier this week, Vodafone chief executive Vittorio Colao said the outcome of the dispute could be a key factor in determining the company's future investments in India.

"The tax issue will be incredibly important for us to determine how (investor) friendly India is."

Colao also said it was "very important to have an outcome here that establishes a principle for the future. This is a concern for our investors and for other international investors."

The latest development comes as Indian authorities scrutinise tax aspects of other international deals.

SABMiller, the worlds second-biggest brewer, has a tax case pending over its 120-billion-dollar acquisition in 2006 of the Indian arm of Fosters from the Australian drinks group.

"This (tax) law has been in place since the 1960s, it has never been interpreted like this -- that's why the Vodafone case is seen as a test case," a tax analyst at an international consultancy told AFP.

Vodafone has faced a rough ride since it entered India, the world's fastest-growing mobile market, with cut-throat competition forcing down call rates and hitting the company's earnings.

I cannot believe in what India did - Giant Tax Bill.

 

[hellofriends]

income tax department is right....and vodafone should pay tax. i am a management student i know the actual case. but you don't worry this tax will not borrow by pakistan, vodafone will earn more than it in one year.

 

[aristocrat]

^^^hey could u explain a bit plz.

 

[Nothing]

I cannot believe in what India did - Giant Tax Bill.

Yeah it is almost USD 2.5 Billion tax bill. It is capital gain tax.
They tried to escape from it by transferring money outside India., but finally sell of entity (A company or stake in company) took place in India.
It is very nice example set-up by GOI and I-T department . Other will also follow and will pay their taxes to government.

And it is GIANT because transaction was also giant around USD 11,218 million . Tax is around 20% for profit for short term capital gain .

 

[somebozo]

David Camoron will regrett his appeasing statements. Because 2.5 bln outflow is likely to hurt vodafone and british jobs very much at this time of economic crisis! He asked for Indian steel and automotive now may be he will also include to list Indian tax breaks and cell phone businesses!

 

[StingRoy]

They can't cheat the Taxman.

Even after paying the tax they will make a profit out of the whole deal. Thats how they were able to rise to #3 position in Indian market. They bought Hutchison Essar when they entered Indian market. Although it may have its implications on future Indian acquisitions, but nevertheless it also sends out a signal to foreign companies that they will have to play by the rules of the state. How was it an overseas deal when the whole operations of the company were in India.

 

[StingRoy]

Some excerpts from the NYTimes article linked below:

Vodafone Is Liable for Tax on India Deal, Court Finds

Indian tax authorities argued that Vodafone should have withheld capital gains taxes from the $11 billion it paid to Hutchison Whampoa for its 67 percent stake in Hutchison Essar, which is now known as Vodafone Essar, India’s third-biggest cellphone company by subscribers.

Indian officials contend tax is owed on the deal because the assets sold are based in India.

Though the ruling is unlikely to dissuade all foreigners from investing in India, one of the fastest-growing economies in the world, it will require them to evaluate any deal with a new risk and cost in mind: taxes.

Most foreign investors who buy or invest in Indian companies do so through offshore entities to protect their gains from taxes. Even many Indian individuals and businesses use foreign shell companies to hide wealth and income from the government, critics say.

India is not alone in going after such deals.

Late last year, China issued a rule that made the sale of stakes in Chinese companies by offshore entities taxable in that country. The rule does not apply to the sale of shares that are traded on a public stock exchange.

 

[Nothing]

David Camoron will regrett his appeasing statements. Because 2.5 bln outflow is likely to hurt vodafone and british jobs very much at this time of economic crisis! He asked for Indian steel and automotive now may be he will also include to list Indian tax breaks and cell phone businesses!

It is nothing with outflow from UK. One company is doing transaction in India for Indian entity. If they are earning some profit they have to pay tax in India. How it will hurt British jobs ?

Vodafone told that they are planing to invest this money in Briton to create job .... what a BS....

In entire case nothing is related to David Cameron and its government.

Please educate your self by reading this article

Hutch deal: I-T Dept asks Vodafone to pay Rs 11,218 cr as tax - The Economic Times

 

[Nothing]

They can't cheat the Taxman.

Even after paying the tax they will make a profit out of the whole deal. Thats how they were able to rise to #3 position in Indian market. They bought Hutchison Essar when they entered Indian market. Although it may have its implications on future Indian acquisitions, but nevertheless it also sends out a signal to foreign companies that they will have to play by the rules of the state. How was it an overseas deal when the whole operations of the company were in India.

Very true ... All companies use government infrastructure to do business. If they are doing business in India they have to follow Indian laws.

There will be not much future implications because GOI is demanding tax on profit, it is not looting it from company without reason and all major countries have same king of taxation rules