Vodafone (Newbury, UK) is considering whether to set aside money to cover the legal risks of investing in India, according to a story published on Bloomberg.
Until now, the operator has resisted making any such provision, but a change to India’s laws could make it liable for a tax payment of around $2.2 billion.
In an interview with Bloomberg, Andy Halford, Vodafone’s chief financial officer, said the new ruling had forced the company to reconsider its financial arrangements.
“The situation has changed and we are looking at it,” Bloomberg quoted him saying. Vodafone’s test over whether it should take a provision “is now being applied differently against a recently introduced, albeit retrospective, legislation.”
Vodafone has faced repeated demands for the tax payment from India’s government ever since it took over Hutchison Whampoa’s Indian operations in 2007.
In January, it won a legal battle against the government in India’s top court, but authorities subsequently made changes to the law allowing them to retrospectively tax cross-border transactions dating back to 1962.
The Indian government had hoped to introduce the new ruling next year, but a panel appointed by the Indian prime minister recently recommended delaying its introduction by three years for administrative reasons.
That panel is due to make a final report at the end of this month.
A tax bill of $2.2 billion would substantially increase the costs of operating in India for Vodafone, which has already spent heavily on building out its network and acquiring spectrum for use with 3G services.
A forthcoming auction of 2G spectrum could put the operator under further cost pressure in the short term.