Indian government orders special audit of Nokia India Accounts – likely to complicate Microsoft deal

Indian government orders special audit of Nokia India Accounts – likely to complicate Microsoft deal
Indian tax laws allow the government to order a “special audit on a private company,” using an independent auditor if there are suspicions of hidden income, unpaid taxes, or undervalued assets.

The Indian government at a national and local level has been at odds with Nokia for months over allegations of unpaid taxes and subsequently seized manufacturing plant in Chennai.  This facility is a significant part of the deal for Microsoft to take over Nokia Devices and Services, and could knock more than $1 billion off the $7.2 billion deal if Nokia is ultimately not allowed to transfer that asset, along with its 8,000 employees to Microsoft.

The audit, which could take up to six months or more to complete, will look at Nokia India’s accounts, perform a valuation of the assets and transactions. A Nokia spokesman in Finland simply noted that, “As with all tax discussions in India, Nokia will cooperation with the authorities and, where necessary, defend itself vigorously.”

This issue in India, along with a few other regulatory hurdles in Asia, has caused the expected merger between Microsoft and Nokia Devices and Services to be postponed from the end of March to the end of April, though spokesmen for both companies continue to state that problems in India will not stop the merger.

The Indian government is trying to get Nokia on the hook for more than $3 billion in taxes, some of which have not even been assessed yet. Moreover, India is demanding Nokia pay about $500 million of that upfront. Another $400 million is being demanded by the Tamil Nadu state government for taxes on devices its says were built and ultimately sold in India, something that Nokia denies and faces its first hearing on the matter April 1st.

source: The Wall Street Journal

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25 Comments

1. DEATHSTROKE9

Posts: 399; Member since: Nov 09, 2013

If Nokia had taken the android route years ago, they would not be in this situation.

2. rd_nest

Posts: 1656; Member since: Jun 06, 2010

Nope, Android or WP has nothing to do with this case. Don't link every event to Android or WP. They have nothing to do with a legal issue. That's plainly related taxes not paid or calculated.

3. Ashoaib

Posts: 3298; Member since: Nov 15, 2013

You are right... but nokia should get away with it... if the amonut of tax is going to be $3 billion then nokia should build a new plant in china which will cost less then $1 billion instead of wasting their scarce resources in paying taxes.. i feel every company use tax avoiding tactics and eat a huge amount of tax so nokia should play smart too in these trouble days

4. alterecho

Posts: 1106; Member since: Feb 23, 2012

They need to pay whats due, even if they shift operations to somewhere else.

5. wolfsaviorzx unregistered

They don't owe anything. Taxation is theft.

6. alterecho

Posts: 1106; Member since: Feb 23, 2012

That will be examined by the independent auditors.

18. Antonyjoseph

Posts: 217; Member since: Apr 06, 2013

May I know which country you are from, where govt asking for taxes is theft? Would love to move there.

19. Antonyjoseph

Posts: 217; Member since: Apr 06, 2013

Its not as simple as that. Just closing the plant will not absolve them of the obligation to pay taxes. For that, Nokia will have to completely exit the Indian market. I am sure their competitors would love that.

7. fireblade

Posts: 717; Member since: Dec 27, 2013

yes of course it has something to do. That's why nokia adopt android this year.

16. Arte-8800

Posts: 4562; Member since: Mar 13, 2014

Blame is to be on the very bad Eflop. How does this guy shows his face to public and why doesn't anyone in Finland kick this Eflop guy out or rage violence against him. Nokia is Finlands pride and joy.

17. Altair

Posts: 367; Member since: Feb 02, 2012

You don't know anything. Only thing you are doing, is wasting yours and others time with your android trolling. Go away plz.

23. papss unregistered

Agreed.. He just wants attention like a typical child.. Maybe ADHD?

8. microsoftnokiawin

Posts: 1268; Member since: Mar 30, 2012

it's quite interesting how the Indian government seems to all of a sudden remember this !!

13. jroc74

Posts: 6023; Member since: Dec 30, 2010

I dont know....reading back thru the links, articles about all this... I wouldnt just dismiss this. In the US you can file a tax return, have more than 1 W-2, submit info for only 1 ...and not get caught up with until a few years go by. I know cause I have had this happen to me a few times.

14. iyngr

Posts: 72; Member since: Jul 14, 2013

Election time INC needs Money.

9. akbarkool

Posts: 42; Member since: Nov 06, 2012

This is terrific news!!! I feel bad about Nokia's financial position, but 6 months??!!! Maybe this can cancel the acquisition after all!!! NOKIA FTW!!!!!

10. SPASE

Posts: 261; Member since: May 03, 2013

How about a special audit on the government as well ;) There'll be a different tune I assure you.

11. AfterShock

Posts: 4147; Member since: Nov 02, 2012

I'm curious as to when, the factory is going to burn down.

15. McJobs

Posts: 107; Member since: Jul 08, 2012

those corrupt bastards

20. 7thspaceman

Posts: 1597; Member since: Feb 14, 2011

Hmm if anything this will make the deal more critical for Nokia because there aint no way they will sell enough smart phones to pay this tax bill even if they sold a lot of Nokia's Android x phones as well as Windows 8/8.1 smart phones. Nokia's CFO must have been an Idiot not to know this was coming. last I read the deal will go through but Microsoft will adjust the amount of money it will pay Nokia for it's assets. I fear Microsoft Will not get the Indian factories but instead will have Taiwan or Main land China factories make their smart phones. microsoft may have to sell it's smart phones in India under it's OWN name. for instance a nokia 920 will be renamed an MS "TechPhone one"

21. PAPINYC

Posts: 2315; Member since: Jul 30, 2011

I think, instead of NokiSoft paying anymore Indian Government Blackmail money, they should close up their production operations in India and move them to Pakistan or a lovely place like Costa Rica. Screw the Indian Gov'mnt!! (Hail roty, though)

24. papss unregistered

If its owed then they need to pay plain and simple.. BUT if they don't then I would sue the government for wrongly accusing them and for slander of their name.

27. darthwho

Posts: 5; Member since: Mar 13, 2014

I would just tell the Indian government to go duck themselves and build a plant somewhere else. It would be cheaper too.

28. DigitalJedi_X2

Posts: 346; Member since: Jan 30, 2012

Telling the Indian government to f*ck themselves or whatever and shirking their responsibility to pay what is owed isn't how it works in the real, adult world I'm afraid. If they do indeed owe it, they should pay it. Nokia refusing to pay it and packing up and leaving could not only screw up M$ buying their smartphone arm, but could mean Nokia having to abandon the lucrative Indian market and losing out on a good chunk of its revenue.

30. phonetekmek

Posts: 70; Member since: Oct 04, 2013

It seems that this "tax" bill may not amount to much more than extortion and if that is the case I say Nokia does what it feels it needs to do to protect their interests.

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