Feeds

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

Mobe maker turns up the heat over tax dispute

Bridging the IT gap between rising business demands and ageing tools

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. ®

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple ran off to IBM
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.