Anil Ambani, a close friend of Prime Minister Modi, benefited from a cancellation of more than 140 million euros in 2015, when Dassault negotiated the sale of Rafale to India. – By Julien Bouissou and Anne Michel
The man at the heart of the “Rafale affair”, which has shaken India for months, is a powerful Indian industrialist whose fortune is estimated at $ 1.9 billion (€ 1.68 billion). Forbes magazine. Anil Ambani is at the same time one of the main beneficiaries of this sale of thirty-six French combat aircraft of Dassault Aviation to India, and a very close to the prime minister, Narendra Modi. Not a day goes by without the opposition in India accusing Mr. Modi of taking advantage of this contract of 7.9 billion euros, negotiated in 2015, favoring his friend Ambani.
In France, the anti-corruption NGO Sherpa filed a complaint, on October 26, 2018, with the National Financial Office (PNF), to request the opening of an investigation into the suspicions of corruption and trading in influence surrounding this transaction. According to information from the World , France has canceled a tax recovery of a total amount of 143.7 million euros, yet claimed for years, in favor of a French company belonging to the group Reliance Communications Anil Ambani. The dispute was settled between February and October 2015, at a time when India and France were negotiating the sale of thirty-six combat aircraft.
What happened that year?
The French company Reliance Flag Atlantic France, owned by Anil Ambani, knows at this time of great financial worries. Its solvency is threatened by a large tax debt. The company provides telecommunications services, operating, inter alia, with other companies in the Reliance group, a transatlantic submarine telecommunication cable between Europe and the United States, and has a turnover of 60, € 6 million for the fiscal year ended March 31, 2014.
Two tax adjustments As revealed by the report of 30 January 2015 by the auditor, whose role is to certify the accounts of the company, and to which Le Monde had access, Reliance Flag Atlantic France is subject to two tax adjustments. In particular, the tax authorities dispute the way in which the company accounted for certain purchases from other companies in the Reliance group, due to a lack of “documentation”, which is tantamount to challenging the methodology used by Reliance Flag Atlantic France for calculate his “transfer prices”. This well known technique of regulators is used by companies to reduce their tax bill. It is used to send profits to tax havens, where they will not be taxed. The parent company of the French company Anil Ambani, Reliance Globalcom Limited, is domiciled in Bermuda … A territory that has just been registered, in March, on the blacklist of tax havens in the European Union (EU).
The first recovery, arrested following a tax audit for the period 1 st April 2007 to 31 March 2010 amounted to EUR 60 million, including interest and surcharges. The company is opposed and, in 2013, proposes to settle the dispute with a payment of 7.6 million euros. It is a net refusal of the tax administration.
The company then lodges contentious appeals. The problems get worse, because a second tax audit is initiated by the administration, for the period from 1 st April 2010 to 31 March 2012. It leads to a new result turnaround of 91 million euros, default interest and penalties included. The company is challenging again. The auditor notes with apprehension that “the amount of the provision is significantly lower than the adjustments made to him” . Jean-François Baloteaud, from AEG Finances, draws the consequences: he refuses to certify the accounts of Reliance Flag Atlantic France. “We are unable to certify whether the annual accounts are, in accordance with French accounting rules and principles, fair and straightforward, and give a true and fair view of the results of the operations of the past financial year as well as the financial position and the company’s assets at the end of this financial year “, can you read in his report of January 2015. The total tax bill amounts to 151 million euros. The company is in danger, it has lost more than half of its share capital, and its equity is insufficient.
A very good news
A few months later, a very good news arrives. The new auditor of the company, Fabrice Abtan, Auréalys firm, notes with relief, in his report of September 29, 2015, the company Reliance FlagAtlantic France is “about to reach an agreement with the tax authorities thanks to a proposal for a comprehensive settlement for an overall amount between 7.5 and 8 million euros “.
Exactly the same amount as the tax administration had refused a few years earlier for settlement of the dispute, then much less important. The agreement in due form is signed promptly on October 22, 2015, a month later.
All company tax remittances, CVAE (contributions on value added companies) and withholding tax for the years from 2008 to 2014, are settled against the sum of 7.3 million euros. A nice gain for Anil Ambani: he saves 143.7 million euros in taxes.
What happened in the meantime?
At the beginning of 2015, Anil Ambani became a key player in
the Rafale contract. He multiplies visits to France, as this Monday, March 23, 2015, where the Indian businessman is in the Ministry of Defense. He met several advisers to Jean-Yves Le Drian, according to an internal email from Airbus leaked in the Indian press, including Christophe Salomon, advisor for industrial affairs, Jean-Claude Mallet or Geoffrey Bouquot. “A confidential visit and scheduled in a very short time as you can imagine,” writes Nicolas Chamussy CEO of Airbus, Tom Enders, which he is the advisor.”Defense Minister Jean-Yves Le Drian has met Anil Ambani a few times, who was looking to develop industrial partnerships with French defense companies,” said his press advisor, who did not want to clarify whether the two men spoke about the Rafale contract, whether he was aware of Reliance Flag Atlantic France’s tax recovery, or even dates of their meetings. “The choice of Anil Ambani as an industrial partner by Dassault is solely Dassault’s,” she adds. Francois Hollande, however, claimed the opposite end of 2018, explaining that France had “taken the partner that was given” by India.
An unexpected windfall
Few people know this, but in the days leading up to Modi’s announcement of his intention to acquire the thirty-six Rafale on April 10, 2015, a dramatic twist is set to take place behind the scenes of the negotiations. who will benefit Anil Ambani. The purchase of thirty-six devices “on shelves”, that is to say straight out of French factories, is good and bad news for France. Admittedly, the aircraft purchased will all be produced and assembled in France, but Mr. Modi has just buried the “contract of the century” won in 2012 by Dassault and which provided for the delivery of 126 aircraft, including 108 assembled on Indian soil . Anil Ambani was absent.
For the past three years, Dassault has been negotiating with Indian public aircraft manufacturer Hindustan Aeronautics Limited for the construction of an assembly line in India. In April 2015, everything is canceled. The call for tenders is replaced by an intergovernmental agreement between India and France. And the public company Hindustan Aeronautics must leave its place to Anil Ambani. Even officials of the Indian Ministry of Defense are taken aback.
For this close to Mr. Modi, it is an unexpected windfall. Because in this new intergovernmental agreement signed between the two countries, the offsets , namely the part of the amount of the contract to be reinvested in India in the form of industrial compensation, are particularly high. They reach about 4 billion euros, half the sales price of aircraft. Other Dassault partnercompanies, such as Thales, will sign joint ventures with Anil Ambani. Even though the amount of offsets must be shared with other Indian companies, the Indian industrialist is rubbing his hands.
At the end of April 2015, a few days after Modi announced his intention to acquire thirty-six Rafales, Anil Ambani registered Reliance Aerostructure Limited and formed a joint venture with Dassault. Did he already know that the offsets would come back to him, when the contract is not yet signed? It will be one year later. Anil Ambani thus becomes Dassault’s new partner at the very moment when, between February and October 2015, the tax administration accepts a transaction of 7.3 million euros instead of the 151 million euros originally claimed.
Theory and practice
Was this tax debt canceled on a political decision? Solicited, the tax administration, held incommunicado, does not comment. But several informed sources explain the World rule and practice. The rule is that any taxpayer who disputes an adjustment has the right to review his tax situation. If it chooses to go through a minister to do so, it should normally refer to the ministers supervising the Directorate General of Public Finance, that is to say the finance ministers or budget or their directors of cabinet. When they are seized by them, the central administration then checks whether the tax audit carried out by their services is solid in law or could be challenged before the judge and can therefore be revised. In both cases, it manages the file without informing the Minister or, in the case of sensitive files, it sends a note detailing its decision to the Minister. Which is supposed to comply with it, by a document entitled “Approved Minister”. But the practice, she tolerates a few sprains. It has happened that a minister has seized the Directorate General of Public Finance of a sensitive subject or a file although he does not have the tutelage. Or better, go through the Elysée to do it.
“Some ministers or heads of state are more interventionist than others,” slips a senior official. The central administration, scrupulous and jealous of its independence, and of which all the decisions can be controlled and must therefore be justified, treats the files according to the law. In 95% of cases, the minister follows the decision of the administration … but he also sometimes goes against it.
Asked about the Ambani case, a control expert gives this testimony, on condition of anonymity: “Even if it happens very often that tax files are stuck for a long time in litigation and suddenly resolve in favor of the taxpayer , testifies it, the political context can weigh, to make evolve a file and to accelerate the regulation, in particular when it is about a file presenting weaknesses in right, where the risk exists to set policies back. ” What corroborates this official: “If a minister Bercy comes with perhaps a suggestion of the Minister of Defense, the tax authority, which is independent and is confident of being, then clearly under pressure . “
Towards a political storm in India
At the end of 2018, a close collaborator of Anil Ambani had boasted to Le Monde , having met with him, at the beginning of 2015, “Emmanuel Macron in his office in Bercy, where the tax problem has been solved. by a phone call to his administration. The group of Anil Ambani, Reliance Communications, contacted many times by Le Monde , has neither confirmed nor denied, not wishing to comment.
Bercy explains that no trace of this meeting exists in the official diaries. Even if it is not there, has it occurred? The press service of the Elysee told Le Monde that “in the memory of none of the advisers in the cabinet [of Emmanuel Macron, Ministry of Economy] , there was such an appointment between Emmanuel Macron and Anil Ambani. ” It has not materially happened because the tax system was not in the minister’s portfolio. “President of the Republic at the time of the facts, Francois Hollande said, through his press advisor, he “was not aware at all,” adding that “tax investigations never go back until ‘to the
president’ .
For their part, the Minister of Finance and Secretary of State for the budget at the time, Michel Sapin and Christian Eckert, said they have no memory of such a file and therefore said not to have intervened in Litigation Reliance Flag Atlantic France. These revelations targeting Ambani are likely to provoke a political storm in India, just as the general elections have just begun. From April 11 to May 19, nearly 900 million voters are called to the polls to renew the Parliament. Not to mention that the Indian Supreme Court agreed on April 10 to investigate the Rafale contract and the suspicions of corruption surrounding it.