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Budget 2020 proposals offer few benefits to M&E industry: EY India
MUMBAI: As always, the industry's hopes from union budget 2020 were high. According to a report from EY India while the budget proposals offer few benefits to the industry, some of the changes may have a material impact which will need to be assessed.
“The budget proposals will provide relief to the foreign companies earning income such as license fees from making compliances in India, provide clarity and do away with avoidable tax litigation through reduction in withholding tax rate for technical fees as well as withholding tax provisions for e-commerce operators. New media and digital business qualifying under start up incentives will get additional impetus from the measures proposed. Reduction in newsprint import duties will help print industry which is going through a tough business cycle. Tax amnesty scheme for resolution of pending litigation offers an opportunity to reassess the tax game in the country,” the report adds.
The report states that the proposed alternate personal tax regime will be relevant to mass employment by the industry in its content production processes, however, it is difficult to determine whether the regime will provide a material differential cash surplus to the employed.
It also adds that expansion of domestic tax regime will lead to tax uncertainty for foreign companies with no resource to any credible advance ruling mechanism which will allow them to understand their tax position upfront.
“Removal of exclusion relating to theatrical receipts would certainly put pressure on the finances of the film businesses with a 10 per cent withholding tax rate and increase their compliance burden. The uncertainty attached to film business certainly makes a strong case for a rate much lower than applicable 10 per cent withholding tax rate. Increase in import duties will lead to increased cost for businesses,” it adds.
Key impacts:
· Withholding tax rate on “fees for technical services” reduced from 10 per cent to 2 per cent, reducing potential litigation on withholding tax rate on content production services and certain other services which do not qualify as “professional services”.
· Exclusion of consideration from “sale, distribution or exhibition of cinematographic films” removed from “royalty” definition that may make theatrical and other receipts from exploitation of cinematographic films taxable and subject to withholding tax at 10 per cent.
· Expansion of domestic source rule will bring to tax income of a nonresident from (i) advertisements targeted at a customer located in India
(ii) sale of data collected from a person in India and (iii) sale of goods or services using data of customer located in India.
· The list of services subject to Equalisation Levy provisions remain unchanged.
· Exemption provided to non-residents earning royalty and fees for technical services from the requirement of filing a return of income, subject to fulfilment of stated conditions.
· Relief provided d to the print industry by reduction in customs duty on newsprint and paper.
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Bill Ackman’s Pershing Square makes $64 billion bid to acquire Universal Music Group
Ackman pitches NYSE relisting plan as UMG board weighs unsolicited offer
The hedge fund has proposed a business combination that values UMG at €30.40 per share, representing a hefty 78 per cent premium to its current trading price. The offer includes €9.4 billion in cash alongside stock in a newly formed entity, with shareholders set to receive €5.05 per share in cash and 0.77 shares in the new company for each UMG share they hold.
Under the proposal, UMG would merge with Pershing Square SPARC Holdings Ltd and re-emerge as a Nevada-based entity listed on the New York Stock Exchange. The move is designed to boost investor visibility and potentially secure inclusion in major indices such as the S&P 500.
Pershing Square Capital Management ceo Bill Ackman argued that while UMG’s operational performance remains strong, its market valuation has lagged due to external factors. “UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business,” Ackman said, pointing to concerns ranging from shareholder overhang to delayed US listing plans.
Ackman also flagged what he sees as untapped potential in UMG’s balance sheet and a lack of clear capital allocation strategy. He added that the market has not fully recognised the value of UMG’s €2.7 billion stake in Spotify, alongside gaps in investor communication.
The proposed transaction would also result in the cancellation of around 17 per cent of UMG’s outstanding shares, while maintaining its investment-grade balance sheet. Pershing Square has said it will fully backstop the equity financing, with debt commitments secured at signing. The deal is targeted for completion by the end of the year.
UMG, however, has struck a measured tone. The company confirmed that its board has received the non-binding proposal and will review it with advisers. It reiterated confidence in its current strategy and leadership under Lucian Grainge, signalling no immediate shift in stance.
The proposal comes at a time when global music companies are navigating evolving investor expectations, streaming economics and capital allocation pressures. For Pershing Square, the bet is clear: sharpen the financial story, relist in the US, and let the music play louder in the markets.
Whether UMG’s board is ready to change the tune remains to be seen, but the spotlight on its valuation just got a lot brighter.
