UK mobile telecommunications giant Vodafone has been told by the Indian government that it owes the country £1.55 billion in tax.
The tax bill relates to Vodafone’s 2007 acquisition of a stake in what was then known as Hutchison Essar, now Vodafone India.
Earlier this year, India’s Supreme Court ruled that Vodafone did not owe capital gains tax on the transaction because Hutchison Essar was not registered in India.
However, India has since changed its laws so that deals such as this do require capital gains tax. The Indian government is now pursuing Vodafone on a retrospective application of the new law.
Vodafone has confirmed that it received the Indian government’s ‘reminder’, but noted that there is no deadline for the payment. "Vodafone has replied to this reminder, stating that it continues to believe that no tax is payable on the [Hutchison Essar] transaction,” it said.
Vodafone has been criticised for its tax practices here in the UK. The company paid zero corporation tax in its most recent fiscal year, despite earning hundreds of millions of pounds in revenue.
CEO Guy Laurence has defended the company’s tax record, arguing that the mobile phone company pays for more than its fair share in mobile spectrum licenses.
"Is there another industry that is going to contribute as much to the Treasury as the mobile networks will in the 4G auction?" Laurence said in October last year. "[Shadow Chancellor] Ed Balls says the money we spend could pay for 100,000 homes. Who else could finance that?"