Vodafone seeks international arbitration

8 May 2014

Vodafone Group has filed for international arbitration in its USD2.2 billion tax row with the Indian government. The cellco, which recently increased its stake in its Indian subsidiary to 100%, had been in negotiations with government officials, but the two sides have been unable to reach a settlement. The government’s claim dates back to 2007 when Vodafone first entered the Indian mobile sector via its USD11.2 billion acquisition of Hutchison Whampoa’s 67% interest in Hutchison Essar (since renamed Vodafone India). While the government said the deal was liable for tax, Vodafone successfully argued in a number of court cases that it should not be taxed because it was a transaction between two foreign companies. The government subsequently moved to amend tax laws to include overseas entities, but Vodafone has continued to fight its corner. According to TeleGeography’s GlobalComms Database, Vodafone is the second largest cellular operator in India, with 18.1% of the country’s 887 million subscribers at the end of 2013.

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