Tax claim: Vodafone sticks to guns, denies ‘compromise’ reports

The Vodafone Group on Friday said that its position has not changed on the $2.5 billion (Rs11,218 crore) income tax demand in India on its $11.2 billion deal to buy Hutchinson and it would defend its position ''vigorously''.

Earlier reports had suggested that Vodafone was willing to pay up to $2 billion in a compromise solution, but Vodafone in a media statement issued later flatly denied this.

It said, ''We continue to believe that there is no tax to pay on this transaction. Every adviser we have consulted, both during the transaction and since, is in unanimous agreement that no tax liability should arise.''

Vodafone said that the law is clear and India has not sought to tax such transactions before. ''To do so would be contrary to international taxation principles, which are specifically designed to encourage foreign investment and eliminate barriers to trade,'' the statement added.

It further said that it will continue to defend its position 'vigorously' and would look forward to the matter being reviewed in full by the Supreme Court on 19 July.

The earlier reports quoted Vodafone Essar's India chief executive Marten Pieters as saying in a TV interview that the company may pay $2 billion to put an end to disputes with authorities, but it also warned that such a move will have a negative impact on Indian companies that have foreign business dealings.