What Reliance Comm Ignores in Its Response to Reported Tax Evasion

RCom’s response leaves a few pertinent points of contention, raised by the Le Monde report, unanswered.

RCom’s response however fails to respond to a few pertinent points which feature in the Le Monde report

(Photo: Reuters) 

Soon after a report by French daily Le Monde claimed that France waived tax recovery worth 143.7 million euros from a French company belonging to Anil Ambani’s Reliance Group, a clarification was issued by Reliance Communications(RCom) on Saturday, 13 April.

The Le Monde report also suggests that the tax recoveries were dropped months after the Modi government negotiated the deal for 36 Dassault Rafale fighter aircraft, for which Anil Ambani was a major offset partner.

RCom denied any ‘favouritism’ or ‘gain’ in the tax settlement, besides asserting that the tax demands were ‘unsustainable and illegal’.

The response, however, leaves a few pertinent points of contention, raised by the Le Monde report unanswered.

No Mention of Reliance Globalcom Limited

RCom, in its official statement, that Reliance Flag Atlantic France SAS is a subsidiary of Reliance Communications, which is based in India.

However, the Le Monde report states that Reliance Flag’s parent company is Reliance Globalcom Limited, based in Bermuda, a tax haven country blacklisted by the European Union. RCom’s statement provides no clarification, or does not even mention Reliance Globalcom.

As the matter pertains to waiving tax, the question of laws related to taxation are of importance and the company would stand to benefit if indeed the parent company has its roots in Bermuda, and not India.

When Was the Tax Settlement Reached?

RCom's clarification mentions that the tax issues came up between 2008-12 but says nothing on when the settlement was eventually agreed upon by Reliance Flag and the French authorities.

The settlement date assumes importance as Le Monde's report suggests that the tax authorities agreed to take the amount offered by Reliance Flag Atlantic France, after a new auditor came on board.

Interestingly, all tax dues were settled against a sum of 7.3 million euros, an amount the tax administration had refused earlier.

Doesn’t Mention Offer Made By Reliance Between Two Tax Assessments

The statement does not touch upon the point that Reliance Flag Atlantic France offered to pay an amount of 7.5 million to 8 million euros after the first tax assessment for the period 1 April 2007 to 31 March 2010 and the second one between 1 April 2010 to 31 March 2012.

The fact that Reliance Flag made an offer to pay, is significant as the amount that the company eventually paid in the tax settlement is exactly the same as what they offered initially.

Ignores That Second Assessment Hiked the Tax Liability

The statement also overlooks the fact that while the first assessment put the tax liability at 60 million euros, the second one in fact, resulted in a hike of further 91 million euros.

The fact that its tax liability went up, also does not add up to RCom’s claim that it was facing operating losses to the tune of 2.7 million euros, during the period.

Moreover, the Le Monde report says that after Reliance flag challenged the second assessment, the then auditor categorically observed: “the amount of the provision is significantly lower than the adjustments made to him”.

Therefore, it is all the more inexplicable that the tax liability was brought down from 151 million euros to 7.3 million euros.