The Indian government is reportedly considering scrapping negotiation with Vodafone over its controversial tax demands.
The two sides agreed to enter conciliation talks last year to avoid the issue being filed with International Arbitration as Vodafone had threatened.
At stake is a tax demand for US$2.4 billion relating to Vodafone's original investment in the country in 2007.
Although Vodafone took control of the then Hutchison Essar back in 2007, the transaction was routed via offshore subsidiaries. As this is a common practice for many companies, Vodafone felt that no taxes were due in India. The government's counter-argument is that the location of the assets, not the jurisdiction of the transaction is the primary issue.
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