India alleges enormous Vodafone tax dodge

Vodafone is trying to cast its dominant force over courts in India in a bid to get its tax debts cleared.

According to Attorney General Goolam Vahanvati, the company has made an official comment claiming that retroactive taxes discourage foreign investments in the country.

The company has also reportedly gone as far as warning other companies not to make new investments in India until Vodafone’s dispute is sorted out, statements that Mr Vahanvati claims are an “attempt at intimidation”.

Vodafone has been slapped with a tax bill of over $2.5 billion, following its 67 percent purchase of the Indian arm of Hutchison Whampoa in 2007.

However, the bill could rise to $5 billion if the courts decide to include penalties.

Of course, Vodafone isn’t happy, but instead of its previous tactics like denial, it’s going down a different path. It has sent Vodafone Chief Financial Officer Andy Halford in to spread the word that having to pay such a big amount means that others will find difficulty with foreign investments.

According to Bloomberg, he advised companies to wait to see how the dispute was resolved before making new investments in India, while still proclaiming that Vodafone didn’t owe the government any taxes.

This has been strongly denied by Mr Vahanvati who said that India’s law means foreign investors never had to worry about money being taken away.

Despite claiming India isn’t ideal for investments, Vodafone quite happily announced earlier this week that it was buying out its partner Essar from its Indian mobile venture for $5.46 billion.

The deal saw Vodafone acquiring the company’s 33 percent share, meaning that the mobile operator now has a 74 percent sharehold in the company.

As well as racking up the tax bill in India, the company has faced controversy in the UK.

In October  it was suggested by Private Eye that Vodafone bought a German engineering company called Mannesmann for €180 billion to avoid paying tax.

HMRC allegedly decided to give the company free pass, reportedly letting Vodafone off with at least £6 billion in tax. It agreed a tax settlement of £1.25 billion in July to resolve the long-running dispute.

It said at the time it had met all its tax obligations and had never received a bill for £6 billion, calling the figure “misleading”.