Vodafone faced with $2.5bn tax demand from Indian authorities

VODAFONE’S tax dispute with the Indian government has escalated, with the country’s authorities repeating calls for the telecoms giant to pay $2.5bn (£1.6bn) India claims it is owed.

The company said this weekend that Indian tax authorities had sent a reminder to Vodafone, demanding it pay the sum, relating to 2007’s purchase of Hutchison Whampoa’s majority stake in what is now Vodafone India.

The demand is the latest event in the long-running feud between the two parties. Vodafone says it does not have to pay the tax, since the demand was quashed by India’s Supreme Court in January last year.

Since then, the Indian government has passed a retroactive tax law in a bid to bring the money in. Still, the application of the law is uncertain, since it applies only in exceptional circumstances and is technically a capital gains tax, which should apply to the seller, not the buyer.

“The reminder does not include a deadline for payment,” Vodafone said. “Vodafone has replied to this reminder, stating that it continues to believe that no tax is payable on the above transaction.”