Vodafone in $4bn court battle over tax

A retrospective tax law change in India could see Vodafone forking out more than $4bn (£2bn) in tax if it loses its court battle against the government, twice what had been expected.

The Indian government claims Vodafone's should have withheld $2bn in capital gains tax following its $11bn acquisition last year of a controlling 67% stake in Hutchison Essar, the country's fourth-largest wireless operator.

If the UK mobile phone operator loses it could face a penalty of 100% per cent of the tax owed plus 12% interest a year.

The government's tax law amendments became effective last month, under which any business that did not withhold tax when it should have would be classified as 'an assessee in default', the Financial Times reported.

Vodafone's defence rests on the principle that the Indian constitution forbids the imposition of such penalties retrospectively.

Further Reading:

Read the FT story: Vodafone faces doubling of India tax bill