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Nokia Takeover In Jeopardy Due To Alleged $3.4B Tax Bill In India
New submitter Snotboble_ writes "The government of India apparently thinks Nokia owes a lot of taxes. They originally told Nokia that the company owed around $340 million, but now reports suggest it could be an order of magnitude higher. Such a large liability would have consequences for Nokia's sale of its handset division to Microsoft. From the article: 'Nokia Corp.'s tax troubles in India worsened Tuesday as local authorities ratcheted up the amount of tax they say the Finnish company may owe to more than $3 billion. Nokia's battle to defend itself from the claims—one of the latest surprise tax bills slapped on big foreign companies in India—could affect its plans to sell its handset division to Microsoft Corp. as the phone company's factory in India is part of the $7 billion deal.'"
nothing like a good 'ol shakedown by a government's tax authority
OK. If the new tax bill is 3B instead of 0.3B announce the closure of the factor and the layoff of its workers. This works in most other places around the world.
Settle on the value of the factory in India and amend the deal. Let India try to collect from empty shell of the company which only owns that factory.
Alas! The first mathematically perfect use of "an order of magnitude". Well done sir, well done.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
According to records, Nokia did about $4B in business in India in 2010 and 2011, but saw 2012 revenue fall about 23%. Still, that's a fairly large chunk of change. If their business from 2006 - 2010 was strong as well, I guess it's possible that the company owes about $3.4B in tax over that time period.
Thing is, they'd have had to be basically paying no tax at all to rack up that kind of bill. And since we can assume Nokia isn't stupid, it seems a lot more like a shakedown.
I know if someone owed me $3B, I'd be getting on top of that right away.
How could any entity allow any valid debit to escalate to such a large amount before calling it in?
Doesn't sound right to me...
Never happened. True story.
Sounds like India wants to kill the sale of the handset division to Microsoft, driving Nokia stock even lower, then conveniently an India company will buy Nokia out. Sound Like India politics at its finest
Knowing India as I do, I will not be surprised at all if Tata emerges as the "Knight in the shining armor" rescuing Nokia from the grab of the "dirty Microsoft".
Hold on, let me catch my breath...
Hahahahahahahahahahahahahahahahahahahahahahahahahahahahaha!!!!!!!
... it seems a lot more like a shakedown ...
My company used to have 4 offices in India. Now we have only one.
Why ?
It's not that we don't like to do business with the Indians, it's the government that we can't deal with.
They are worse than the Mafioso.
They can turn the rules around overnight and demand the ransom, and they can do it in a totally legal manner.
The longer the Indian government behaving like this the worse their reputation gonna be - and the less the multinationals will be willing to invest in India.
Muchas Gracias, Señor Edward Snowden !
before finally agreeing to pay.
I worked at a large multinational that was slated to be acquired by a larger multinational.
Then, mid-way through the process came the "Oh no! India wants billions in 'back taxes' due to the sale!"
The solution was that rather than merging the two companies (triggering the giant tax bill), the Indian Development Center was kept as the last remnant of the old multinational and was now considered a "wholly owned subsidiary" of the buying multinational. Apparently the lack of a formal merger of just the portion of the company based out of India negated the tax bill somehow.
So
a) This is nothing more than the standard shakedown the government of India does whenever there's a merger of giants like this.
b) It can also be avoided by some rather facile legal trickery.
It strikes me as foolish both to make such huge claims of taxes owed when a merger like this occurs and to make those taxes so easy to avoid.
Corollary to Hanlon's razor: Any significantly advanced stupidity is indistinguishable from malice.
Sounds like the India does not want a branch of the NSA called "Microsoft" obtaining marketshare to spy on its citizens/government with hardware backdoors.
You want cheap labor?
You want little environmental regulation?
You want to hide from taxes in your home country?
Then build in the developing world. But don't cry when the developing world's lack of rules and regulations bite you in the ass with sudden "fees", "taxes", and other sundry costs. You chose to leave your home country to enhance shareholder profits. Surprise, the rest of the world doesn't have to operate according to your shareholder's profit motive.
/* Dang, I can't type that well. */
Imagine the world's surprise if India began charging the same hourly rates for it's workers as Western countries charge for theirs. So not only does it appear that Nokia used Indians for cheap labor, they're also trying to scam the government. The government of India is probably the most corrupt in the world (seriously, bribery is a part of the system there, but rather than call it "lobbying" they actually call it "bribery" and care not what anyone thinks about it), and are no one to fuck with.
Politics; n. : A religion whereby man is god.
None of the articles explains the basis for the Indian government's claims. Does anyone know the basis for this dispute?
They should call their bluff. Both Microsoft and Nokia completely shut down operations, sales, call centers, factories and licensing in India and move it all to China. 3 Indians for one American, but 2 Chinese for the cost of one Indian after all.
they should just call off the deal. The price has effectively gone up 50%.
My God can beat up your God. Just kidding...don't take offense. I know there's no God.
It's a game played by the Indian government. Nokia's handset division is to be sold to Microsoft, which has a ton of cash on hand. It's a game worth playing, as Nokia has no way of packing their bag and getting out tomorrow, so does Microsoft. Microsoft wants that handset division as part of its strategy, and the liability can be worked out by Nokia/Microsoft to transfer to Microsoft, which will then work out a deal with the government, which will promise to sweeten via some kind of tax break on the condition that Microsoft invest more in the country. At the end, they will make a join release, saying that each one has made a score, it is good for the consumer, for the shareholders, for the country, for Jesus, for Buhda, for Ganesha, for Annapurna, for Hanuman, and whatever deity you've got. Everyone would be happy, and it would be the end of the story.
It's the same kind of game governments play all over the world.
I'm glad somebody finally knocked that snooty Ken Jennings off his perch.
.. Rupee's or Dollars?
There are certain sectors in India which work well. The tax department being one of them. And surprisingly there are honest politicians, policemen, judges and so on. Broadly categorizing India and Indians as corrupt is a weak generalization.
What if I say every adult Finn is a closet xenophobe? Will you agree to this generalization?
Nokia may or may not be liable to this tax. The rule of the land you have to follow. There is a judicial process if you want to take that path to contest. Indians and Indian government need not be blamed if the sale of Nokia is held up due to this issue. It does not matter to us. Blame the consulting idiots who are advising Microsoft and Nokia in this sale for overlooking these issues.
And any comment regarding "India will lose, we will take our business elsewhere" is an empty threat. India is one billion strong - we have one of the biggest middle classes and the largest group of young population in this planet. Take your business elsewhere and you will lose. Ask yourself - where will you take your business - China? Russia? Yes, they are great places as far as I know.
Now, get off my lawn.
Tat Tvam Asi
Fine - dump the factory in India. India can get fucked and the deal can proceed.
Just take a survey of all Indian government software licenses. Given the expense and the insanity involved in tracking MS licenses, I'm sure that they could be found to owe at least 3.4 Billion in Licensing and penalty costs.
Well.. maybe. Or Maybe not. But Definitely not sort of.
This government tried something similar against Vodafone in 2012 but got smacked down, first by the Supreme Court, and then by the Shome committe. The Vodafone case was quite similar because that too involved an M&A scenario and the government was claiming retroactive effect for some new tax laws.
Vodafone case details:
http://www.thehindu.com/business/companies/vodafone-wins-rs-11000-cr-tax-case-in-supreme-court/article2817238.ece
I suspect something similar will happen here and Nokia will settle for a significantly lower amount.
More details on the Nokia case:
http://www.thehindu.com/business/nokia-owes-rs21153-cr-it-dept-tells-delhi-hc/article5440948.ece
Just state in the merger contract that any tax liabilities owed by Nokia are the responsibility of Nokia and do not follow the Indian factory to Microsoft.
Its Nokia that owe any taxes and the sale of the Indian factory to Microsoft shouldn't mean that somehow the taxes owed go with it.
tax dept took penalties with interest of few 1000 Rupees for 2009 from me recently due to arachaic formulas. Big fish will compromise with corrupt authorities & govt will loose a billion rupees. Laws are same for rich/poor ONLY ON PAPER.
More likely they've been dodging taxes and playing the shell game with money: No we didn't make any money, those are licensing fees payed to owners of the Nokia name who just happen to live elsewhere.
The fucking cheats are getting caught and asses nailed to the wall.
Maybe they can jail the HMFIC for tax evasion as well.
I know it's not the real definition of karma, but it's a better subject line than "neener, neener, that's what happens when you sell out to Microsoft!"
I've actually dealt with both the indian govt and the income tax dept. This is nothing to do with the government. In the tax department, every division has yearly quotas to meet. The quotas increase every year, so the higher level officials are always on the look out to find an easy way out. Sounds familiar?
Nokia might have also taken advantage of a tax free zone to set up their factory and imported machines and inventory, duty free. That comes with riders to create jobs, and generate revenue of so much per year for a number of years. Any attempt to prematurely close, or move the factory, is taxable, along with punitive charges.
Someone made a comparison with the Vodafone case. This doesn't look like that at all.
> Nokia Takeover In Jeopardy Due To Alleged $3.4B Tax Bill In India
In another news, the USA and Israel suddenly decided not to sell advanced weapons systems to India and halt the currently ongoing deliveries, including that of the the C-17 "Big Mac" strategic military transport plane, which is essential to replenish remote indian army outposts in the Himalayas region.
In yet another news, the USA suddenly lifted long-standing weapons exports sanctions on Pakistan, India's belligerent neighbour, even though the two countries have conflicting claims on Kashmir and have been to war twice over the issue. The USA is now offering to export lastest batch F-16 Block 60 fighter-bomber jets and JASSM air-launched stealth cruise missiles to Pakistan, to allow replacement of its antiquated, chinese-made MiG-21 copycats.
In yet another news, the US Congress revokes free trade rights from India, owing to Delhi's military-industrial collaboration with the undemocratic russian regime of President Putin, including the development of nuclear powered submarines and stealth warplanes, which threaten to upset the stability of the region.
If Elope hadn't fucked off with all the working products and tanked Nokia, would it be worth twice what's offered? Yes? Well, given that MS don't want those products, then even hiking the cost of takeover 50% still leaves a large deduction due to Elope's knifing of the company to Microsoft's benefit.
"Don't make jokes off my jokes."
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
India is helping to slow down this terrrible offshoring of my job from the US to India.
Thanks guys, I really appreciate it.
So if our source trees are in India and they seize the facility, do they get the tree to publish?
gut the sucker and burn it down, let India collect on the 6-buck value of the land. still the extortionists.
if this is supposed to be a new economy, how come they still want my old fashioned money?
It's Finland... I guess they are west, sort of. West of Russia. Then again everything is except Canada and the US, does that make more sense?
Indians most corrupt while doing business abroad.
http://business.rediff.com/report/2009/sep/24/indians-among-most-corrupt-while-doing-business-abroad.htm
Casteism
I see lot of racist comments here on India. Being an Indian I know we have corruption but companies like Nokia use the very system to get lewageDo u think they are stupid not to setup a plant in "Least-Corrupt" Finland and pick India? Once in a while they get caught on the wrong side then yell on unfairness.Also we have no idea who is on the right side.
FYI the plant in question is from my city and I know the state govt in power was elected recently as a replacement to the hugely corrupt previous govt and they have been fairly clean for more than a year now.
So let us not come to conclusions or brand a whole population.