Nokia's India plant could be taken out of the Microsoft deal

Nokia's plant in Chennai, India continues to be a source of tax issues with local authorities, so much so that it could be shut down by Nokia and be excluded from the upcoming Microsoft acquisition.

The plant, seized last year by local government for tax evasion allegations, was freed up in December after the Finnish company paid INR7 billion ($116 million). Now, the government is demanding hundreds of millions to be held in escrow accounts to ensure the payment of future taxes, further complicating the acquisition by Microsoft planned for this month.

Nokia's appeals in Indian courts have not gone their way, and selling the plant is not a viable solution as the tax issues would scare away potential buyers. While both Nokia and Microsoft have stated that the legal issues should not have any impact on their acquisition deal, taking out one of Nokia's biggest assets will knock as much as $1 billion off the $7.2 billion total cost of the acquisition.

Whether or not the Chennai plant issues get resolved, the image that foreign investors have of India may already by soured due to the aggressive pursuit of taxes taken on by local government.

Via