Nokia says its tax dispute in India will not stand in the way of sale to Microsoft

Nokia says its tax dispute in India will not stand in the way of sale to Microsoft

The planned acquisition of Nokia's Devices and Services business by Microsoft will not be affected by tax issues in India, the company has said in a statement. Microsoft's takeover includes ownership of a handset factory in Chennai in southern India, but Nokia has an ongoing tax dispute with the Indian government.

The factory has not been operating since December after the government claimed that Nokia owed around $3.4 billion in taxes. Since local authorities stepped in, Nokia says that the jobs of 30,000 people are at risk but insists that the Microsoft purchase will go ahead as planned in the near future.

The Finnish company issued a very short statement making it clear that the deal with Microsoft should not be affected in anyway by the dispute over unpaid taxes:

"Nokia would like to stress that recent developments in India related to ongoing tax proceedings are not expected to affect the timing of the closing nor the material deal terms of the anticipated transaction between Nokia and Microsoft, announced on September 3, 2013. The transaction is still expected to close in the first quarter of 2014, subject to regulatory approvals and other customary closing conditions, irrespective of the proceedings in the Indian tax case."

There's now something of a standoff. The Indian government will not want to risk 30,000 jobs by keeping the factory closed, but it will be equally keen to recoup outstanding taxes it believes are owed. Opening the factory, allowing the deal to go ahead and no preventing handsets from being produced would be a massive boost to the local economy, so it's hard to imagine that Nokia's statement is wrong -- it is really in the government's interest to allow things to get up and running as soon as possible.

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