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Vodafone Gets Short Reprieve in Indian Tax Dispute

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Vodafone has gained a small reprieve in its Indian tax dispute after the government indicated that it is still open to a negotiated settlement in the long running $2.2 billion tax demand.

The Finance Minister had indicated last month that talks were off and it would push ahead with the tax demand, but the government has refrained from accepting the Ministry's proposal.

Including interest and penalties, Vodafone could face a theoretical demand for USD3.3 billion if the Finance Ministry's proposal had been accepted in full by the Cabinet.

The matter is now still open to conciliation talks, although Vodafone has not ruled out taking the matter to International Arbitration if necessary.

This particular tax dispute has however been parked slightly, while an unrelated tax dispute is argued in the courts. That relates to transfer pricing for services offered by Vodafone companies to its Indian subsidiary, which the tax officials says were not correctly priced in an effort to minimise tax. Vodafone denies that claim.

Once that tax dispute is settled, the government will move forward with the consiliation talks over the much larger amount which relates to Vodafone's USD11.7 billion purchase of 66% stake of the local mobile network in 2007.

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Tags: vodafone  India