Vodafone in talks with govt to set up framework for tax issue

Written by Press Trust of India | New Delhi | Updated: Nov 27 2013, 10:54am hrs
Facing a tax liability of over R11,200 crore, British telecom major Vodafone on Tuesday said it is in talks with the Indian government to establish a framework to resolve the long-pending dispute.

Vodafone continues to be in talks with the Indian government to see if we can establish a framework which would allow discussions to begin regarding a possible solution, the company said in a statement to PTI when asked if it has agreed to the conciliation talks with the Indian government.

According to government sources, Vodafone has selected its senior official Mathew Kirk for the pre-conciliation talks, while the government would be represented by law secretary P K Malhotra.

The UK-based telecom majors chief executive Vittorio Colao is scheduled to visit India in the first week of December and may meet finance minister P Chidambaram.

The British telecom major is facing a tax liability of over R11,200 crore, along with interest, on its 2007 acquisition of Hong Kong-based Hutchison Whampoas stake in Indias telecom major, Hutchison Essar.

The company has expressed its keenness to reach an amicable settlement on the matter. It had offered to settle the dispute through conciliation to which government agreed, but there are differences over the rules under which it would take place.

While the British telecom major has indicated its preference for conciliation under the United Nations Commission on International Trade Law (UNCITRAL), India has proposed settlement under the Indian Arbitration and Conciliation Act.

The Supreme Court last year had ruled in Vodafones favour, saying the British company was not liable to pay any tax over its 2007 acquisition of mobile phone assets in India.

The government later that year changed the rules to enable it to make retroactive tax claims on already-concluded deals, drawing criticism from global business groups.

Following amendment to the I-T Act 1961 last year, the Income Tax department had issued a letter in January to Vodafone International Holdings BV stating that the company is required to pay the tax.

Vodafone replied, saying that they do not owe anything to the Indian government. Vodafone earlier wanted to take India to international arbitration but later offered conciliation on the issue.

EGoM on telecom likely to meet next week to discuss M&A rules

The empowered group of ministers on telecom, headed by finance minister P Chidambaram, is likely to meet next week and discuss the long-awaited mergers and acquisition (M&A) rules.

The department of telecom is co-ordinating for a date in the first week of December. Final date has to be decided by the EGoM, a government official told PTI.

The EGoM last met on November 22 when it was to take call on M&A guidelines that is expected to pave way for consolidation of mobile phone companies in the sector.

The ministers had decided on spectrum base price and other details for the third round of auction at the meeting.

Inter-ministerial panel Telecom Commission has given its nod to allow telecom companies to merge in a manner that their market share does not exceed 50 % in terms of subscriber base.