NEW DELHI – In fresh revelations in the Rafale deal, French newspaper Le Monde reported that Anil Ambani’s French-registered telecom company was given tax waivers worth €143.7 million by local authorities, shortly after the announcement by Prime Minister Narendra Modi to buy 36 Rafale jets in fly away condition.
According to the newspaper, Mr. Ambani’s telecom company “Reliance Atlantic Flag France” was investigated by French tax authorities and found liable to pay €60 million between 2007 and 2010.
In an attempt to reach a settlement, Reliance had offered to pay €7.6 million, which was rejected by the authorities and upon further investigation for the period 2010 to 2012 an additional tax of €91 million was levied.
During a visit to Paris in April 2015, Prime Minister Narendra Modi made a surprise announcement for direct purchase of 36 Rafale jets in fly away condition in April 2014 citing “critical operational necessity” of IAF.
By this time the tax liability on Reliance was at least €151 million according to the newspaper. However, six months after the announcement, French tax authorities made a settlement for €7.3 million instead of €151 million.
According to this, between February and October 2015 as India and France began negotiations on the deal for the 36 jets, Mr. Ambani got a tax waiver of €143.7 million from the French.
In September 2016, India and France signed a €7.87 billion Inter-Governmental Agreement (IGA) in September 2016 which has a 50% offset clause to be executed by the French partners.
Dassault Aviation, the manufacturer of Rafale jets, chose Mr. Ambani’s Reliance as an offset partner to execute its share of offset obligations. There have been questions on this selection as Reliance has no experience in the defence sector.
In a series of revelations, The Hindu detailed how the Prime Minister’s Office (PMO) ran parallel negotiations in the deal giving French companies a range of concessions from the defence procurement procedure in the Rafale deal.
Last year, Francois Hollande who was the French President when the announcement on Rafale was made in 2015, told a French news outlet, Mediapart.fr that his government didn’t have “a choice” in the selection of Reliance Defence as the offset partner in the Rafale deal.
Responding to the Le Monde story, Reliance Communications in a statement said the case pertains to 2008 and denied any “favouritism or gain” from settlement.
According to the statement, Reliance FLAG Atlantic France SAS is a subsidiary of Reliance Communications, India and owns a terrestrial cable network and other telecom infrastructure in France. The tax demands were completely “unsustainable and illegal” the statement said, and claimed that tax disputes were settled “as per legal framework in France available to all companies operating in France.”
Reliance Communications said that between 2008-12, Flag France had an operating loss of ₹20 crore (€2.7 million) and French tax authorities had raised a tax demand of over ₹1,100 crore for the same period. “As per the French tax settlement process as per law, a mutual settlement agreement was signed to pay ₹56 crore as a final settlement,” it said.
A statement released by the Ministry of Defence said the tax concession is not related to the Rafale deal and drawing connections between the two “is a mischievous attempt to disinform.”
“Neither the period of the tax concession nor the subject matter of the concession relate even remotely to the Rafale deal concluded during the tenure of the present Government. Any connections drawn between the tax issue and the Rafale deal is totally inaccurate, tendentious and is a mischievous attempt to disinform.”