India 'least favourable', makes sense to exit, Nokia tells govt

NokiaBetter idea to manufacture in China and export to India, says company. (Reuters)

"The state has not issued a government order in accordance with the MoU," Nokia wrote in the non-paper.

The company has also mentioned the bilateral tax treaty between India and Finland, under which the software business is to be taxed in Finland, where Nokia is based.

In March, the finance ministry had served a retroactive income tax demand of Rs 2,080 crore on Nokia. The I-T department asked the company to pay the tax evaded on its royalty payment to Finland-based parent Nokia Oyj for downloading software on mobile devices manufactured at its Sriperumbudur facility since 2006.

This, Nokia has said, violates the bilateral tax treaty between the two countries. "Nokia does not think India can override its international obligations and the mutual tax treaty, by introducing retroactive domestic laws without greatly disturbing the trust international business in India," it wrote.

"Taxation", it said, "should not drive business decisions on locating operations, but current tax claims against Nokia and other multinational companies operating in India have too great an impact on the predictability and certainty of Indian business environment to be ignored.

"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." Companies involved in tax disputes in India include Cadbury Plc, Royal Dutch Shell, Vodafone Plc and LG Electronics Inc.

Nokia said: "A holistic view is needed to understand the big picture and to ensure that possible short term benefits of aggressively changed fiscal policies do not override long term policies to develop Indian economy, create growth and jobs by attracting investments into India with predictable business environment as has been done in the past...

"It is very important that the Indian government corrects quickly these surprising actions of individual tax authorities against Nokia to restore the trust of Nokia and other multinational companies in India as a good place of business."

... contd.

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