Vodafone tax dispute blocks progress on India-Canada deal

Vodafone’s tax dispute with Indian authorities appears to have upset the signing of a foreign-investment protection deal between India and Canada, according to a report from Reuters.

Stephen Harper, Canada’s prime minister, had been expected to sign such a deal while on a trip to India this week, but India’s government is now reviewing the terms of the agreements it has with other countries as a result of the Vodafone (Newbury, UK) dispute.

Vodafone’s tax dispute with Indian authorities appears to have upset the signing of a foreign-investment protection deal between India and Canada, according to a report from Reuters.

Stephen Harper, Canada’s prime minister, had been expected to sign such a deal while on a trip to India this week, but India’s government is now reviewing the terms of the agreements it has with other countries as a result of the Vodafone (Newbury, UK) dispute.

India’s government has demanded $2.2 billion in taxes from Vodafone arising from its takeover of operations owned by Hutchison Whampoa (Hong Kong) in 2007, but the UK operator says it is not liable for those payments because the transaction was between two foreign companies.

India’s Supreme Court took the operator’s side but the government subsequently changed the law so that it could retrospectively tax cross-border transactions since 1962.

Since then, Vodafone has threatened to initiate proceedings against the government on the basis of a foreign-investment protection deal that is already in place between India and the Netherlands.