Nokia Warns That Indian Tax Disputes Could Imperil Future Investment
Nokia has warned that India is becoming an undesirable market in which to operate handset assembly plants and it might consider moving them to China.
In a letter sent earlier this year to the government, Nokia warned that the "political risk" associated with investing in the country could lead it to reconsider future investments.
Nokia is one of many companies facing unexpected tax demands, and the recent changes in tax legislation, largely to overturn a tax victory by Vodafone have worried overseas investors.
The lack of legal certainty and the difficulty of getting a stable legal solution to disputes are often cited as the biggest worries.
In a 'non-paper' dated June 19, 2013, Nokia sent a harsh, terse message to the Ministry of Commerce & Industry: "India has suddenly become the least favourable market."
The company added that the dispute over the non-refund of VAT by the Tamil Nadu government 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".
Nokia is also fighting a tax demand over the import of software for installation in the mobile phones assembled in the country. It accuses the government of violating a bilateral tax treaty between India and Finland that is supposed to prevent double-taxation issues of this sort.
"The political risk of operating in India has therefore become suddenly substantially higher and may inevitably influence future decisions to develop one's operations in India." the company added.
On the web: Indian Express