Some light at the end of the tunnel? Government ready for out-of-court settlement in Vodafone tax dispute

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In what could bring some sigh of relief for telecom firm Vodafone, the Government has said that it is ready for an out-of-court settlement with the telco with respect to the latter’s over Rs 20,000 crore tax case.

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“As far as out-of-court settlement for Vodafone is concerned we have always said that we are prepared to discuss with friends and colleagues in Vodafone in good faith as to whether it might be possible to get to negotiated settlement we are always open to those discussions,” Minister of State for Finance Jayant Sinha was quoted as saying in media reports.

He also said that: “Our goal is to ensure that our tax system is fair, it’s simple, it’s predictable… Our endeavour with respect to all these specific cases is that we always we will attempt in all good faith to try and settle them. That remains our consistent principle for these specific cases.”

Vodafone got muddled in a tax dispute with respect to its acquisition of Hutchison Essar in the year 2007. While the basic tax dispute is for Rs 7,990 crore, but the total outstanding, including interest and penalty, has escalated the amount to about Rs 20,000 crore. Sinha also indicated that the best way to deal with litigation is by elimination of exemptions and reducing corporate tax rates.

“The other thing that we have underway is simplification of the tax code…so whether it is through cleaning up or streamlining exemptions, whether it is simplifying the tax code, we are absolutely trying to reduce the amount of litigation that is in the system right now,” he added.

Currently, the Government and the telco have named their arbitrators, but they have not yet agreed on a third arbitrator to deal with it.

It should be also noted here that the tax dispute with Vodafone relate to retrospective amendments of the I-T laws carried out by the UPA government in 2012 to overturn a Supreme Court verdict, which had favoured Vodafone.

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Having over six years of experience in business journalism, Krishna has a knack for writing on telecom and IT. She believes that tryst with technology is the best thing that has ever happened to mankind. Krishna is a telecom analyst

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