Vodafone's Indian Tax Liabilities Could Reach $4.6 Billion

                                         

Vodafone has revealed that its potential Indian tax liabilities could reach as much as USD4.6 billion if every appeal were to be rejected by the various regulators.

There is the long-running dispute over the tax on its original investment in the country, which Vodafone won, and then lost when the government controversially changed the law.

Vodafone has now filed to have that case heard by International Arbitration, and the two sides are negotiation to try and avoid that further long running process and settle the matter.

In its annual report, Vodafone said that it has not received a formal notice for the tax demand, but had accepted a letter reminding it of the tax demand prior to the Supreme Court ruling that struck it out.

It is widely expected that both sides will eventually announce some sort of compromise on the issue, if only to get it sorted once and for all.

Vodafone is also fighting a range of other tax demands that have been filed, which collectively add up to around USD1.7 billion if the potential penalties that could be applied are indeed applied in full.

The main dispute is in transfer pricing where one division provides services to another, and where the Indian authorities dispute the costs of those services, as they affect the amount of tax paid on them.

"Litigation remains pending in the Telecommunications Dispute Settlement Appellate Tribunal, High Courts and the Supreme Court in relation to a number of significant regulatory issues including mobile termination rates, spectrum and licence fees, licence extension and 3G intra-circle roaming," Vodafone said.

There is also an unrelated to tax issue of radio spectrum fees, which Vodafone said amounted to a charge of around USD890 million.