India mulls Vodafone tax concessions

The long-running, multi-billion dollar tax dispute between Vodafone and Indian authorities could finally be drawing to a close.
 
The Indian government has provided the operator with written notification that it is ready to end the dispute, a Finance Ministry source told Bloomberg.
 
This letter was reportedly a response to a missive from Vodafone signifying that it is prepared to reach an amicable settlement.
 
Tax officials may offer concessions including waiving interest and penalties on the bill, and may extend these to all cases where changes to tax law are applied retroactively, as in Vodafone's case.
 
Whether India and Vodafone can reach an amicable settlement remains to be seen, but both sides appear to be taking a more conciliatory tone compared to even earlier this month, when Indian officials sent a formal “reminder” for Vodafone to pay the bill.
 
At the time, Vodafone responded with a statement that it “continues to believe that no tax is payable.”
 
The tax demands, which with interest and penalties included could be as high as $2.5 billion, relate to Vodafone's 2007 acquisition of its Indian unit from Hutchison Essar. 
 
Vodafone won a Supreme Court challenge against the tax bill in early 2012, after arguing that because the transaction occurred offshore between two foreign holding companies, Indian tax officials had no jurisdiction over the deal.
 
But the government then amended its tax law to include similar transactions, and controversially allowed the new rules to be applied retroactively.
 
The decision has sparked friction with the international investment community. The conciliatory approach with Vodafone may be an attempt to restore confidence. An expert panel convened by PM Manmohan Singh has already recommend the government make retroactive tax demands only sparingly.

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