Nokia Takeover In Jeopardy Due To Alleged $3.4B Tax Bill In India 226
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.'"
Re:corruption (Score:2, Interesting)
Does it count as racist if I say I am not surprised by this move from the Indian government?
Probably not. I've had Indians explain that some businesses are hampered by the fact that traveling from one side of the city to the other crosses multiple local tax jurisdictions. Each wanting to collect a tax as goods move across the city.
Finally (Score:5, Interesting)
Re:corruption (Score:3, Interesting)
MSFT can't afford to back out of the deal. They are in desperate need of Nokia's support for Windows Phone 8. Without the merger, any slim hope of gaining a foothold in mobile is dashed. MSFT would have to admit defeat. That won't happen, so MSFT will use its political US clout to hammer the price tag down to something "reasonable" and then write the check. Even if the price tag didn't go down, they would write the check. They can't afford to not do so. It would be suicide.
Re:Announce shutdown of factory ... (Score:5, Interesting)
The tax is on the value of the factory. The factory is obviously more valuable than the tax liability. Shutting down the factory would have to be a bluff, a very bad one at that.
"Shakedown" looks very promising (Score:5, Interesting)
... 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.
Standard Operating Procedure for India. (Score:5, Interesting)
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.
what's the basis for the dispute? (Score:5, Interesting)
Re:corruption (Score:5, Interesting)
Sure sounds like it.
I know corporations are evil little demons when it comes to actually playing on a level playing field in regards to taxes though.
It can also just as easily be possible.... that Nokia have been dicks for years trying to get around the taxes and India has finally had enough of their shit. An opportune moment? Absolutely. Egregiously So.
Just playing devils advocate for India here, even considering the massive levels of corruption in their government.
The only difference between India and the US, is that US politicians are already sufficiently paid to look the other way on taxes. Way too many assholes with their hands in the cookie jar to stop that over a few measly billion.
Re:corruption (Score:5, Interesting)
It's not racist. The Indian government is pathetically corrupt. It's truly awful, and goes from the very bottom (police, petty local officials) right to the top. Finland, on the other hand, is one of the least corrupt countries in the world.
I know nothing about this case, but I'm going to trust the Finns on this one until proven otherwise.
(Disclosure: I'm a half-Indian who's lived in Finland and done a lot of work with Nokia. I also have business interests in India.)
Re:what's the basis for the dispute? (Score:5, Interesting)
I've been following this pretty closely, since I have a large position in NOK stock which I initiated about the time this news started percolating. You can get most of the story via following the links in the comment sections at seeking alpha (search for "nok", then look in news and alerts). This is not new, and has been going on for over a year, and is complete BS. NOK was in compliance with the laws when the work was done, then India changed the tax laws (and made the changes retroactive), and now expect NOK to pay. NOK is a trial balloon, and if they get away with it, there will be many other western corporations hit by this same 3rd-world silliness. A large oil company was also shaken down in a similar manner (forgot which); they settled for much less than $3.4B.
Even if India somehow wins here, I don't believe this won't affect NOK or MSFT at all. If this goes through, and NOK have to pay these taxes in India, which is highly unlikely, then they'll file an amendment on taxes they have paid to Finland for the amount they have to pay to India. The end result if India wins will be a massive loss in western investment for India, significant misery for the Indian people affected by the Western pullout, and a miniscule amount of additional tax revenue.
You are not a racist, you are ignorant... (Score:4, Interesting)
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.
Shades of the Vodafone case (Score:4, Interesting)
Vodafone case details:
http://www.thehindu.com/business/companies/vodafone-wins-rs-11000-cr-tax-case-in-supreme-court/article2817238.ece [thehindu.com]
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 [thehindu.com]
Re:corruption (Score:4, Interesting)
Plenty of Indians are racist, usually against what they perceive as of different race of Indian people, the Nepalese or the Chinese though, not that often westerners - but that too.
and classist, too. even fascist
they have no intention of getting 3.4 billion.. but threatening with that is what they use to extort money for their parties cause, for their local gov, for their own pockets. you know, like the mob.
you know, EXACTLY like a 3rd world cop pulling you over and threatening you with huge fines for whatever to get you to pay something on the spot. local taxi cabs then get around that by just having some cash ready to give to the crocodiles when they see them(but unfortunately for nokia, it is illegal for nokia to keep a bribery fund nowadays for that... so they have to see the texas hold 'em to the end).