Vodafone begins arbitration against India in tax dispute

NEW DELHI Wed May 7, 2014 9:39pm IST

A vendor selling ''paani puri'', a traditional snack, walks past closed shops displaying an advertisement for Vodafone in Jammu May 22, 2012. REUTERS/Mukesh Gupta/Files

A vendor selling ''paani puri'', a traditional snack, walks past closed shops displaying an advertisement for Vodafone in Jammu May 22, 2012.

Credit: Reuters/Mukesh Gupta/Files

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NEW DELHI (Reuters) - Vodafone Group Plc has begun an international arbitration against the Indian government in a more than $2 billion tax case, toughening its stance in a long-running dispute that has dented foreign investor sentiment.

The British mobile phone operator was widely expected to go for an international arbitration after its talks with the Indian government failed to find a solution last year.

Vodafone, which last month took full ownership of its India unit after buying the 15.5 percent it did not already own, filed for the arbitration on April 17, it said in a statement on Wednesday. It did not give details.

A spokesman for the finance ministry, which was in talks with Vodafone over the dispute, declined immediate comment.

The tax dispute stems from Vodafone's acquisition of Indian mobile assets from Hutchison Whampoa in 2007.

In 2012, the Supreme Court ruled that Vodafone was not liable for payment of any tax on the acquisition. The government later that year changed the rules to enable it to tax deals that had already been concluded.

Uncertainties over policy in India have unsettled investors, and tax claims on foreign companies have been a major concern. IBM Corp, Royal Dutch Shell Plc and Nokia Oyj are among foreign firms contesting local tax claims.

(Reporting by Devidutta Tripathy and Sumeet Chatterjee; editing by Jane Baird)

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