Feeds

Nokia's India threat letter: 'It's cheaper to make phones in China'

Mobe maker turns up the heat over tax dispute

High performance access to file storage

Nokia’s long-running tax dispute with the Indian authorities appeared to take another turn after it was revealed that it sent the commerce ministry a strongly-worded letter branding India its “least favourable market” and threatening to move production to China.

Written in June, the letter said that the “political risk” of operating in India had become “substantially higher” thanks to recent tax claims lodged by the government, according to the Indian Express.

In March, the finance ministry made a retroactive income tax demand of Rs 2,080 crore (£204m) which Nokia believes violates a bilateral treaty between the two under which Nokia’s software business is to be taxed in Finland rather than India.

The letter apparently went on to warn that such moves may “inevitably influence future decisions to develop one's operations in India”.

The mobile giant is also not happy that the regional Tamil Nadu government has refused to honour a promise to hand over 10 years’ worth of VAT refunds in exchange for Nokia setting up operations in the Sriperumbudur Special Economic Zone.

This withholding of money has made it “more cost efficient for Nokia to have transferred the manufacture of mobile phones to China and to import them to Indian market rather than manufacture them in Chennai”, the letter apparently noted.

Nokia’s Chennai handset plant is the company’s largest globally, employing over 8,000 workers, so the firm would seem to have some leverage over a government keen to avoid any big name foreign investors pulling out of the country.

Vodafone, Google and LG, amongst others, have all been hit with big bills which have strained relations in recent months.

However, in a statement emailed to The Reg, Nokia was keen to play down any problems with the state.

It said that it's still committed to India, adding the following:

Nokia can confirm that it has been in discussions with the Central Government and State Government over ways to bring greater clarity to the business environment in India. These discussions have been both constructive and productive, and both sides have worked in a true spirit of cooperation. Evidence of this is the Tamil Nadu government’s recent issuing of a Government Order to us.

The Chennai plant would remain a key part of its global manufacturing strategy, it added.

For so long a global growth engine when it comes to the technology industry, India is currently suffering a mini-economic crisis which has seen the rupee drop to record lows against the dollar.

However, analysts The Reg spoke to argued that the country’s IT giants could actually use the weak rupee to their advantage in boosting profits thanks to the large percentage of income they make overseas. ®

Top three mobile application threats

More from The Register

next story
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Record labels sue Pandora over vintage song royalties
Companies want payout on recordings made before 1972
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Number crunching suggests Yahoo! US is worth less than nothing
China and Japan holdings worth more than entire company
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
prev story

Whitepapers

SANS - Survey on application security programs
In this whitepaper learn about the state of application security programs and practices of 488 surveyed respondents, and discover how mature and effective these programs are.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.