Vodafone facing $4bn tax bill
London, July 12, 2008
British mobile phone giant Vodafone could face a tax bill of more than $4 billion if it loses a court battle with the Indian government over its investment in Hutchison Essar, the Financial Times has reported.
Indian authorities are seeking to tax Vodafone's $11.1bn purchase of a majority stake in Hutchison Essar, the country's fourth-biggest wireless operator.
India's tax department claims that the company should have withheld around $2bn of capital gains on the government's behalf.
The daily business newspaper said Vodafone could face a penalty of 100 per cent of the tax owed, plus 12pc interest a year if it loses the case.
A verdict was expected in the coming weeks after hearings on the case ended this week, according to the paper.
Vodafone had agreed to buy a 67pc stake in Hutchison Essar from Hong Kong-based Hutchison Telecommunications International in April last year.
The transaction - India's biggest foreign direct investment - was part of the group's strategy to expand its footprint in emerging markets amid shrinking demand in mature Western countries for mobile phone services.