Vodafone warns India tax bill to hit $5bn

CALIFORNIA, USA: Vodafone , the world's largest mobile operator by revenue, warned that a $2.5 billion tax bill it faces in India could double while the company fights it in the country's Supreme Court, the Financial Times reported on Friday.

The report quoted Andy Halford, the company's chief financial officer, as saying on Wednesday night that Indian authorities threatened to impose penalties for non-payment that could increase the tax bill to $5 billion.

India maintains Vodafone owes taxes related to its 2007, $10.9 billion acquisition of Hutchison Essar, a fast-growing Indian mobile operator, the report said.

In April, India's Supreme Court asked the country's tax office to restrain from enforcing penalties on Vodafone until an order is passed after a case hearing in July, but allowed it to continue with its proceedings, the British firm said.

Vodafone has set aside $2.5 billion in an escrow account in the event India's Supreme Court rules against it before the end of the year. The company has made no special provision for the liability in the belief it will win the case, the FT said.

The bill "is either $2.5 billion or it could be double that if we take extreme (scenarios)," Halford was quoted as saying in the report. "We've done a lot of M&A and this has never happened. We are not making any moves until this is resolved."

Vodafone has faced a host of problems since entering the fiercely competitive Indian arena in 2007 and the company's experience in India is often cited as a cautionary tale for foreign players