Vodafone plans war with India over new taxes

VODAFONE yesterday threatened the Indian government with international arbitration, warning that it will not go down without a fight over the country’s proposed retrospective tax.

The telecoms giant served the Indian government with a Notice of Dispute via Vodafone’s Dutch subsidiary, which has a bilateral investment treaty with India.

Vodafone said that India’s retrospective tax proposals “amount to a denial of justice and a breach of the Indian government’s obligations under the bilateral investment treaty to accord fair and equitable treatment to investors.”

The company added that the new legislation “would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone.”

Vodafone’s victory in the Indian Supreme Court earlier this year over a $2.2bn tax bill from its 2007 acquisition of Hutchison Whampoa’s Indian arm prompted India to propose a retrospective tax on 50 years of overseas deals.

George Osborne, as well as the CBI and other trade bodies, has spoken out against the new laws, which would reverse the judgment of several cases, including Vodafone’s.

The bill is set to be approved by the Indian government next month.

The tax could also affect Kraft over its 2010 purchase of Cadbury, and SABMiller which bought Foster’s in India in 2006.