UK telecommunications giant Vodafone has confirmed it is taking steps towards settling a $2.2 billion tax dispute in India.
In a report in The Timesnewspaper, the mobile ‘phone company said it was considering putting money aside to deal with the case – which has largely eclipsed its recent investment into the market.

Claw back

Despite being exonerated by the country’s Supreme Court in January in a row over capital gains tax, Vodafone was then hit by retrospective changes in foreign takeover law, specifically designed to claw back tax from the company’s $6.9bn acquisition of the Indian mobile ‘phone assets of Hutchinson Whampoa.

Vodafone had claimed that the sudden change in tax laws represented a ‘denial of justice and a breach of the Indian government’s obligations to accord fair and equitable treatment to its investors’.
But chief financial officer Andy Halford has now said the decision to set money aside was ‘being applied differently against a recently introduced, albeit retrospective legislation’.
Compromise
Vodafone had claimed that it was not liable to pay capital gains tax on the Hutchinson deal as the transaction was between two foreign companies. However, New Delhi disagreed because of the amount of Indian assets involved.
But weeks after the Supreme Court ruled in Vodafone’s favour, finance minister Pranab Mukherjee announced the legal changes in the tax system. Since then, Mr Mukherjee has become India’s president, and his replacement as finance minister, Chidambaram Palaniappan, is reportedly more willing to compromise.