Claim is damaging oil company
Cairn CEO urges India PM to end long-running tax dispute
Cairn Energy chief executive Simon Thomson has urged India’s prime minister to resolve a long-running tax dispute which he says is damaging the Edinburgh-based oil explorer.
Mr Thomson has written to Narendra Modi stating that the $1.6 billion claim, first lodged two years ago, has forced the company to sell assets, delay its investment plans and cut 40% of its workforce.
He says the dispute has caused a $1 billion value loss to the company and was having a major detrimental effect on the business and its shareholders.
The Times of India reports that a letter from Mr Thomson followed the Indian PM’s statement in London that the government “will not resort to retrospective taxation and has demonstrated this position in a number of ways”.
In January 2014, Cairn Energy was slapped with an assessment notice on alleged capital gains made on a 2006 internal reorganisation. No tax demand has been raised so far.
“Following your public comments in London, I would be grateful if you could please clarify the position on Cairn’s retrospective tax case,” Mr Thomson wrote.
The company denied any tax was due even if the retrospective amendments to Income Tax Act are applied as the group reorganisation had not resulted in any real income accruing to it.
“This is a very unfortunate conclusion to our 20-year investment in India where Cairn has been a model corporate citizen and created a legacy asset, which is seen as an excellent example of what can be achieved through India and UK cooperation,” he wrote.
Thomson said the company wants a “constructive and open dialogue with the Government of India and would welcome the opportunity to proceed to a satisfactory resolution which is beneficial to both India and Cairn Energy Plc”.
The income tax department says Cairn Energy allegedly made a capital gain of Rs 24,504 crore in 2006 while transferring all its India assets to a new company, Cairn India, and getting it listed on the stock exchanges.
Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for $8.67 billion, still holds 9.8% stake in Cairn India. But the IT department has barred the British explorer from selling this stake.
The tax matter “is having a major detrimental impact on our business and to our UK and international shareholders”, Thomson said, expressing willingness to meet Modi.