Vodafone Exonerated from $4.4bn Indian Tax

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Vodafone Group (LSE:VOD), the telecommunications giant, has been exonerated from paying taxes and penalties totaling to $4.4bn (£2.8bn) by the Indian Supreme Court.  The verdict could come as good news to other foreign corporations, which have been charged in court on similar grounds.

Accusation against Vodafone

Vodafone was accused of not paying the required taxes when it brokered a deal to acquire $11bn Indian assets of China’s Hutchinson Telecommunications back in 2007.

In its defence, the UK-based global telecommunications company said that it did not owe tax on the acquisition, since a company registered in Cayman Islands legally held the Indian telecom assets of Hutchison.

In May 2007, Vodafone, through its Dutch subsidiary, bought a 67% stake in CGP Investments Ltd, a firm based in the Cayman Islands.

Company’s statement

In expressing its joy concerning the judgment by India’s highest court, the company said:

“The court has concluded that Vodafone had no liability to account for withholding tax on its acquisition of interests in Hutchison Essar Limited (now Vodafone India Limited) in 2007.”

Since the statement was made, the company’s stocks have increased by 2.60% as at 12.02 P.M. today.

Multinationals operating in India

The Indian government has been enacting stringent regulations for multinationals operating in the country in an attempt to increase corporate tax revenues.

It is said that about eight international companies are facing similar court charges in India, including GE, SABMiller, Cadbury, AT&T, Sanofi, and Vedanta. As such, the ruling may affect them.

“This settles a prolonged litigation which had created a lot of uncertainty for multinationals,” said Sandeep Ladda, executive director at PricewaterhouseCoopers in India.”

“This should provide much needed respite to other litigants in other cases,” he added.

India’s new tax laws, which are scheduled to be implemented in 2013, has stipulations that oblige multinationals who carry out transactions similar to Vodafone’s liable to tax remittance.

Importance of the Indian market

Vodafone is paying much attention to its’ emerging markets such as India. In the six months to 30 September 2011, the company made a loss of £9m in the country but experienced an improved growth of 18.4%.

India represented 9% of the UK-based telecoms giant total revenues during the period.

Company spotlight

Vodafone Group is a mobile communications company, with a presence in Europe, the Middle East, Africa, Asia Pacific and the United States. It began life as a company spun-off from Racal Electronics plc.

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 Origin of Vodafone

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