France waived taxes worth €143.7 million (Rs 1,125 crore at current exchange rate) owed by a local subsidiary of Anil Ambani’s Reliance Communications in 2015, around the same time when India was negotiating the Rafale jet deal, French newspaper Le Monde reported on Saturday.
In early 2015, the French government auditor had found unpaid taxes worth €60 million and then €91 million by Reliance Flag Atlantic France, which is owned by Ambani, according to documents accessed by Le Monde. The tax liability had been pending for years, but the French government accepted a settlement of €7.3-million (Rs 57 crore at current rates) between February and October 2015, the report said.
In its findings in early 2015, the auditor had refused to certify the company’s accounts as it was not sure if they were “straightforward and accurate” according to French rules. The auditor alleged that Reliance Flag Atlantic France was “improperly documenting its transactions with other companies within the Reliance Group – a commonly used technique to move transfers to tax havens so that it can avoid a tax burden”. At that time, the government had refused an offer from the Reliance firm for a €8-million settlement, Le Monde reported.
However, a new auditor took charge later that year, and on September 29, said that the company is “about to arrive at a settlement of between €7.5 million to €8 million”, according to the newspaper.
Reliance issues clarification
Reliance Communications on Saturday confirmed that it had paid around €7 million or Rs 56 crore as settlement to French tax authorities but denied allegations that there was any “favouritism or gain” from this settlement. It also claimed that the tax demands were “completely unsustainable and illegal”.
A spokesperson said Reliance FLAG Atlantic France SAS is a subsidiary of Reliance Communications, India. FLAG France “owns a terrestrial cable network and other telecom infrastructure” in the country, the spokesperson added.
“During the period under consideration by the French Tax Authorities – 2008-2012 – i.e. nearly 10 years ago, Flag France had an operating loss of Rs 20 crore (i.e. € 2.7 million),” the spokesperson said. “French tax authorities had raised a tax demand of over Rs 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 Rs 56 crore as a final settlement.”
Reliance settled the tax dispute “as per the legal framework in France available to all companies operating in France,” a spokesperson said.
No connection, says Defence Ministry
The Ministry of Defence on Saturday claimed that the tax settlement had nothing to do with the Rafale defence deal that India and France signed. “Neither the period of the tax concession nor the subject matter of the concession relate even remotely to the Rafale procurement concluded during the tenure of the present government,” the ministry said, adding that any connection drawn between the tax waiver and the Rafale deal “is totally inaccurate, tendentious and is a mischievous attempt to disinform”.
No political interference, says France
France on Saturday also said there was no political interference in the tax settlement. “A global settlement was reached between the French tax authorities and Reliance Flag, a telecom company, in a tax dispute pertaining to the period 2008-2012,” French Ambassador to India Alexandre Ziegler said. “This settlement was conducted in full adherence with the legislative and regulatory framework governing this common practice of the tax administration. It was not subject to any political interference whatsoever.”
Ambani’s newly-formed company Reliance Defence was in October 2016 chosen as a partner to fulfil the offset obligations in the Rafale deal. Indian Opposition parties have questioned the choice of a new company over the state-owned Hindustan Aeronautics Limited.
The Rafale deal was announced in April 2015 during a visit by Prime Minister Narendra Modi to Paris, and was signed in September 2016 after months of negotiations. Two weeks before Modi’s visit, Ambani had visited France and met the then defence minister and his top advisors, according to a report by The Indian Express in February.
Opposition parties in India claim that Ambani’s company was favoured for the deal because of his closeness with Prime Minister Narendra Modi. In September 2018, a French media outlet had quoted former President François Hollande as saying that his government “did not have a say” in choosing Ambani’s company for the deal. He had claimed the Indian government had proposed Reliance Defence’s name for the pact, which was agreed upon when he was president.
However, Dassault Aviation, the manufacturer of Rafale jets, has repeatedly claimed that its choice of Reliance Defence was its own.