* Move may help settle $2 bln Vodafone tax dispute
* Finance minister likely to move amendments in finance
(Adds details, quotes)
By Manoj Kumar
NEW DELHI, Jan 7 The Indian government is likely
to approach parliament next month to water down retrospective
tax rules that damaged investor confidence, two finance ministry
officials said on Monday, a move that may help settle
British-based Vodafone Group Plc's long-runnning $2
billion tax dispute.
Vodafone, the largest overseas corporate investor in India,
has repeatedly clashed with Indian authorities over taxes since
it bought Hutchison Whampoa's local mobile business in
The government was heavily criticised by the corporate
sector for introducing the tough tax rules last year at a time
India was suffering a sharp economic slowdown and trying to
Finance Minister P Chidambaram has for several months been
considering recommendations by a government panel that said past
mergers and acquisitions should not be taxed.
Vodafone, the world's biggest mobile operator by revenue,
said in a statement last week that it had received a reminder
from Indian tax authorities on the disputed tax dues, adding it
believed that no tax was payable on the deal.
"(The) Finance Minister is likely to approach the parliament
next month on the retrospective issue," said a senior finance
ministry official, who asked not to be identified because of the
sensitivity of the issue.
He declined to say whether the government was considering a
waiver of the entire tax bill or cancelling interest and penalty
charges on the original tax demand.
However, the officials said Chidambaram was likely to
introduce amendments in the 2013 Finance Bill to revise the
amendments that were introduced last year along with the budget.
Then Finance Minister Pranab Mukherjee introduced an
amendment enabling authorities to make retrospective tax claims
on long-concluded corporate deals after the Supreme Court had
quashed the government's tax demand on Vodafone.
A committee headed by the finance minister's economic
adviser, Parthasarathi Shome, has recommended that past mergers
and acquisitions should not be taxed, or the government should
waive both interest and penalty.
The officials said Finance Minister P Chidambaram was
looking at the recommendations to work out a solution to the
Vodafone dispute by considering its impact on revenue receipts
as well as investor sentiment.
They said the government needed parliament's nod to provide
tax relief to the company, as this would also affect tax demands
amounting to at least $5.5 billion for other such deals.
On Saturday, the Economic Times reported that tax
authorities had asked Vodafone to pay 140 billion rupees ($2.5
billion), including interest on the tax dues.
One official said the letter was just a reminder to Vodafone
to pay the tax following last year's amendment in the Act. "It
is not a fresh tax notice," the official said, adding the
parliament could provide relief.
The official said Vodafone had also expressed willingness to
hold talks, and a solution could soon be reached.
Last April, Vodafone threatened the Indian government with
arbitration proceedings in its fight over the retrospective tax
(Additional reporting by Devidutta Tripathy; Editing by Tony
Munroe, Frank Jack Daniel and Ron Popeski)