Walmart will deduct $1.5-2 billion as taxes before issuing cheques to SoftBank, eBay, Naspers and Flipkart’s co-founder Sachin Bansal.
Walmart’s acquisition of Indian e-commerce Flipkart is expected to help the government rake in up to USD 2 billion following the former’s discussions with the income tax authorities, according to a report by The Economic Times.
The Bentonville, United States-based retailer will deduct $1.5-2 billion as taxes before issuing cheques to SoftBank, eBay, Naspers and Flipkart’s co-founder Sachin Bansal.
According to the report, at least two senior Walmart executives Vice President and Treasurer Pedro Farah and senior director of mergers and acquisitions (M&A) tax Geoff Adams, met senior income tax officials to assure them that the company will ensure that the tax dues are given to the government.
Flipkart’s largest investor SoftBank, which is selling around 20 percent stake in the online retailer, has estimate its tax liabilities at around $600 million, while budgeting for a 60 percent return on its investment in Flipkart, the report suggests.
The Masayoshi Son-led firm and other Flipkart stakeholders who are exiting it will get credit for the tax deducted by Walmart, the report adds.
The report suggests that the government has kept the Walmart-Flipkart transaction under scanner to avoid the repeat of a situation like the Hutch-Vodafone deal, where the telecom giant did not deduct tax dues before closing the deal with Hutchinson Whampoa. The Vodafone tax issue is currently under arbitration.
The global retail giant had in May announced that it would acquire 77 percent stake in one of India’s largest e-commerce firms for USD 16 billion. Walmart is aiming to enter India’s fast-growing e-commerce market.
On Wednesday, the Competition Commission of India (CCI) approved the acquisition, three months after the announcement of the plan.
"The commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore, the same is hereby approved," the CCI said in its order letter.CCI said the two parties were not close competitors in the B2B sales nor did they have a combined market share that could raise competition concern.