Vodafone India tax arbitration delayed

Vodafone remains at loggerheads with India's government over a long-running tax dispute, resulting in both parties being forced to extend a deadline for arbitration of the matter by a month.

The UK headquartered operator and India's government failed to agree in neutral third-party arbitration in a dispute over tax owed following Vodafone's acquisition of its Indian unit in 2007, the Economic Times reported.

A Vodafone Group spokesperson told the Indian newspaper the decision to extend the deadline for appointing a third-party arbitrator was a mutual one, while an Indian government source emphasised that the delay should not be taken as a sign of hostility between the two parties.

The lack of agreement pushes back the beginning of talks aimed at ending the seven year dispute, which centres on a demand by Indian tax officials for payment of at least INR200 billion (€2.4 billion/$3.2 billion) in relation to Vodafone's acquisition of its local business from Hutchison.

Vodafone was originally ordered to pay taxes on the deal in 2010, but appeared to have been cleared of the need to pay in early 2012, when India's Supreme Court ruled the tax charges did not apply because the deal was conducted between two offshore holding companies.

India's government subsequently amended the country's tax laws to retrospectively cover the transaction, and the amendment still holds despite a parliamentary panel recommending the tax provision be scrapped.

Vodafone has long asserted it does not have to pay the tax, and threatened to take the case to international courts if India's government insists on applying the fee.

The operator will continue down the international route if a neutral party is not appointed within the extended arbitration deadline, the Economic Times added.

For more:
- see this Economic Times article

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