SHARES in Vodafone were hit yesterday on renewed speculation that the group will have to set aside $2.2bn (£1.4bn) to cover a tax bill in India over the telecoms firm’s 2007 purchase of China’s Hutchison Whampoa.
Vodafone is considering making a provision for the charge in its next round of company accounts in November, chief financial officer Andy Halford said yesterday. “The situation has changed and we’re looking at it,” he told Bloomberg.
The firm has fought a long legal battle with the Indian government over a tax charge for its investment, and the country’s supreme court threw out the case in January.
However, the government has announced plans in recent months to introduce retroactive capital gains legislation that would potentially allow it to tax Vodafone for the deal.
Shares in Vodafone fell 1.2 per cent yesterday – just over 2p a share. Although the firm is considering the provision, it is still far from clear if it will have to pay out.
India has recently appointed a new finance minister and with the country keen to encourage outside investment as growth in its economy slows, interest in taxing investment is believed to have waned in recent months. The country’s leader Manmohan Singh has pushed back the law’s introduction.
“In reality, the matter will likely be settled between Vodafone and the Indian tax authorities,” Espirito Santo’s Andrew Hogley said, adding that any payment would probably be lower than $2.2bn.
Vodafone, the world’s second largest mobile network operator, paid around $10.8bn for Hutchison Whampoa’s Indian arm in 2007, one of the biggest ever investments in the country.