Vodafone bullish on India despite tax troubles

At the time Vodafone Plc made its entry into the Indian market five years ago the company would have never have imagined it would be facing such issues such as spectrum pricing and the tax troubles it has run into over the last two years.

Undoubtedly, telecom major's biggest worry is the dispute with the Indian tax authorities over the capital gains tax it is being asked to pay by the IT authorities.

Vodafone entered the Indian market with its acquisition of Hutchison's stake in the joint venture with Essar.

''When the Tata Group was buying Land Rover and Jaguar did UK authorities ask Tatas to pay such a tax? Or did Bharti Airtel pay withholding tax when it acquired the African operations? No. Then why should Indian authorities ask us to pay a tax on a transaction that has happened in another country. This is unprecedented,'' said Andy Halford, group chief financial officer, Vodafone Group Plc.

''Even if tax were to be payable, the question is who has to pay. The party who made profit is Hutchison. Why for four years has no one in the Indian tax department gone after Hutchison at all?'' he poses.

According to tax authorities Vodafone is liable to pay $2.5 billion on the transaction. Vodafone has contested the claim on grounds that the transaction took place in Cayman Island and not in India.