Feeds

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

Mobe maker turns up the heat over tax dispute

Internet Security Threat Report 2014

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. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
MI6 oversight report on Lee Rigby murder: US web giants offer 'safe haven for TERRORISM'
PM urged to 'prioritise issue' after Facebook hindsight find
Assange™ slumps back on Ecuador's sofa after detention appeal binned
Swedish court rules there's 'great risk' WikiLeaker will dodge prosecution
NSA mass spying reform KILLED by US Senators
Democrats needed just TWO more votes to keep alive bill reining in some surveillance
'Internet Freedom Panel' to keep web overlord ICANN out of Russian hands – new proposal
Come back with our internet! cries Republican drawing up bill
What a Mesa: Apple vows to re-use titsup GT sapphire glass plant
Commits to American manufacturing ... of secret tech
prev story

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
Seattle children’s accelerates Citrix login times by 500% with cross-tier insight
Seattle Children’s is a leading research hospital with a large and growing Citrix XenDesktop deployment. See how they used ExtraHop to accelerate launch times.
10 threats to successful enterprise endpoint backup
10 threats to a successful backup including issues with BYOD, slow backups and ineffective security.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?