Finance Ministry: We can’t waive Vodafone tax

The government cannot waive the multi- billion dollar tax liabilities that Vodafone and Cairn Energy face, although it has done the most it could in offering to remove interest and penalty if the principal is paid, revenue secretary Hasmukh Adhia has said.

In an interview, Mr Adhia said the government had earlier indicated to companies facing taxes owing to enactment of a law that retrospectively taxed their business, to waive interest and penalty upon payment of principal amount as means to settle the tax dispute out-of-court. The Budget for 2016-17 now makes the offer more formal and puts it on statue, he said. “The government has defined its limits. This is how far we can go.”

He added, “Earlier, it was only the signal that we were giving. Now it has come in the statute. The government has now said that this is how far we can go... The government has shown that this is the best we can do and that’s why we are putting it in the statute.”

Explaining why the government could not completely waive the tax demands raised against the MNCs, he said retrospective amendment to Income Tax Act was brought in by the previous government and the current government cannot undo it completely. “Retrospective law was not done by this government, it was done by previous government. Now for this government to waive the entire thing looks little odd. So this is why the government has said that this is how far we can go,” he said.

UK oil explorer Cairn Energy is facing a tax demand of `10,247 crore on a 2006 business reorganisation it carried out in its India unit before getting it listed. The company says it has paid all taxes due and there was no unpaid liability. It invoked India-UK BIPA to take the government to arbitration over the issue. British telecom giant Vodafone is also facing tax liability over its $11 billion acquisition of 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007.