Almost a year since Kraft Foods succeeded in its pursuit of Cadbury, the US food giant has become the latest multinational to face tax allegations in India.
Kraft has been hit with a lawsuit in New Delhi that accuses the company of evading tax on its takeover of the UK-based confectioner, which has a subsidiary in India.
Speaking to just-food today, Kraft rejected the allegations and said it was “fully committed to complying with Indian law”.
The allegations levelled at Kraft follow claims made against brewing giant SABMiller two years ago. The UK-listed brewer faced an investigation over why it did not pay tax on its 2006 acquisition of Foster’s beer business in the country. The investigation is understood to be ongoing but SABMiller was said to have argued that it had no tax obligation as the deal was settled outside of India, beyond the tax authorities jurisdiction.
Multinational nervousness over tax scrutiny in India was heightened just a few months ago when Vodaphone was ordered to pay billions in capital gains tax on its 2007 acquisition of domestic mobile phone operator Hutchison Essar.
Vodaphone had argued that, as the deal took place in the Cayman Islands through holding companies, it should not be liable for tax.
However, given Vodaphone was buying an Indian firm, it could be argued tax should be paid. Kraft’s acquisition of an ostensibly UK business should not, perhaps, face quite the same penalty.
