Finnish major Nokia, once a big seller of mobile phones in India, is probably going to shut down its manufacturing unit in Tamil Nadu. Tax dispute is the basic reason of this big step, as per the company.
According to the reports, Nokia said in an unofficial letter to the Ministry of Commerce and Industry that it would be 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 those in Chennai.”
However, as per the reports, Nokia wants to leave Indian market for two big reasons. First, the state of Tamil Nadu had agreed to give Nokia back the 4% value-added tax (VAT) that the company had paid on phones shipped from its factories in Finland. But the state government did not pay it back.
The second reason is the central government is seeking Rs 20.8 billion ($329 million) taxes on income from downloads on phones made in India. But Nokia pleads that a bilateral tax treaty between India and Finland, where it is headquartered, does not recommend any such payment of tax.
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The manufacturing unit of Nokia in Tamil Nadu, which will be closed down soon, is one of its big factories with employee strength of 38,000. It was set up in 2006 and has produced about 800 million phones so far.
Nokia has reportedly said in a general Press statement that “Taxation 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.”
“Nokia is committed to India. The country is a priority market for us, and Chennai plays an integral part in our global manufacturing strategy. To date, Nokia has invested USD 285 million in its manufacturing operations in Chennai, providing direct and indirect benefits for tens of thousands of residents,” Nokia said.
Nokia was the largest-selling mobile phones in India for many years. Later, Samsung dominated the market.
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