Nokia has been involved in a long term tax battle with the Indian government for more than a year now, and things don’t seem to be getting any better for the Espoo company. Adding fuel to this fire is the Tamil Nadu government, which has recently moved to assess sales tax for devices that are exported from the Chennai Sri Perumbudur manufacturing facility. Nokia claims that these allegations from the government are baseless, as, by law, exports are exempt from taxes. With yet another tax evasion claim, it will be even harder for Nokia to complete its transition in time for the Microsoft acquisition.
It is well known that Nokia exports a lot of devices from the assembling plant in Sri Perumbudur, Chennai. We had even visited the factory a couple of times, where we were shown how the Asha and the other low end devices are manufactured, or rather assembled, and shipped from the plant. Nokia mainly exports the low cost devices from this facility but the company has been supplying its own local market too, with devices from the factory. According to Nokia, the Tamil Nadu Government claims that all devices were not exported and just sold domestically in India, which the company refutes, and believes that a quick check of customs documentation would reveal the real story.
Nokia considers the claim to be completely without merit and counter to domestic tax laws. In India, exports are by law exempt from tax, and Nokia has proved consistently that devices produced at Chennai are exported abroad. Indeed, the company has been regularly assessed and audited by the tax authorities since 2006 without incident, and it has also won numerous export awards from governmental organisations.
It is absurd that the Tamil Nadu tax authority is now claiming that devices made in Chennai were not exported and were instead sold domestically in India. We contend that this allegation has no basis in reality whatsoever; it could easily be rebuffed by a check of documentation provided to various governmental departments including Customs.
As you can see above, the company is vehemently refusing the claims, and hopes to defend itself in court. To do that, the company has already filed a writ to the Madras High Court, to contest the supposedly dubious claims made by the government. Previously, the Nokia factory was raided, the Finland government tried to help, but the condition hasn’t subsided at all. In fact, it has just worsened for the company, as recently, the Supreme Court completely rejected its appeal to transfer assets over to Microsoft, as a part of the acquisition.
In a country like ours, this does not usually happen unless there is a huge misunderstanding between the two parties involved. We are guessing it’s just a matter of conflicting egos than problems in tax laws that a huge company like Nokia usually adheres to. But there are always two sides to a story, which we may even never get to hear. But what we hear, will be delivered to you, so stay tuned to the blog for more information on this, and let us know what you think, in the comments section below.