Did Cadbury use a phantom factory to dodge taxes?
India says the Mondelēz subsidiary lied to get a tax exemption, thereby avoiding $46 million in taxes.
India is accusing Cadbury of dodging $46 million in taxes by tweaking documents to get a tax exemption offered to companies that built new factories in the northern Indian state of Himachal Pradesh by March 31, 2010, according to The Wall Street Journal. Unfortunately for Cadbury, investigators say there's no way the factory could have existed by then because it didn't have the proper government approvals.
Instead, the investigation found that Cadbury manipulated information about expansion at an existing plant to make it sound as if the company built an entirely new factory before the deadline.
To top it off, the U.S. Securities and Exchange Commission is also investigating the phantom plant to see if Cadbury bribed Indian officials to stay quiet about its nonexistence. That would violate the Foreign Corrupt Practices Act, which forbids U.S.-listed companies from bribing foreign officials.
Cadbury's parent company, Mondelēz International (MDLZ), vowed to cooperate fully with the investigation, but Mondelēz itself didn't exist when all of this allegedly went down. Just before the tax exemption deadline in 2010, U.S.-based Kraft Foods (KRFT) bought Cadbury and its brands like Crème Eggs, Dairy Milk and Dentyne. Kraft wanted these brands to help open up emerging markets like India, where Cadbury racked up $400 million in sales the year before the buyout. Kraft Foods then spun off its North American grocery business and became Mondelēz last October.
Mondelēz says sales in India have grown 20% to 30% a year since then, which puts Cadbury's sales in India at $700 million to $800 million. Because Cadbury didn't get its license for a factory in Northern India until May 29, 2010, and didn't get the OK to start production at a new plant until Jan. 14, 2011, according to the report, Cadbury has sold about $591 million in goods from that time through this January without paying taxes on those sales.
It's not that Cadbury doesn't have a factory in Northern India, mind you. It's just that its plant in Baddi, which produces Dairy Milk chocolates and cocoa drink Bournvita, originally opened in 2005 and added only a second floor in 2009.
That addition was presented to the Indian government as an entirely new factory, which is a much bigger fib than telling children that a rabbit with a chicken's voice lays foil-wrapped chocolate eggs each Easter.
I'm conservative and this $hit has to stop. These companies like Google, Facebook, Apple, GE, etc... paying no taxes and getting millions or billions in REFUNDS is crazy. I'm all for creating an environment conducive to business, but between the left wanting to spend us into oblivion and the right wanting to give away the tax farm, who's looking out for the average guy. People who are tied to their party in some blind faith are dreaming. Wake up people and start to question everything! I feel like I'm living in a bad version of the Matrix or something. My country is disappointing me and my countrymen/women are buying the excuses their party gives them, thus blaming the other party. Strip away a few emotional issues and 99% of us all want the same thing. Party politics keeps people at eachother's throats, and distracted from issues of importance.
The left claims to want these tax loopholes closed, but I would like to be a fly on the wall IF the repubs caved and gave in all of a sudden. I bet you could hear a pin drop until the back sliding began. They are all in bed together with business, one party just denies is more than the other. They all deserve an exit pass for the bs they've pulled on us.
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