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

Discussion in 'Economy & Infrastructure' started by mylegend, Aug 24, 2013.

  1. mylegend

    mylegend Regular Member

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    India 'least favourable', makes sense to exit, Nokia tells govt
    India has become the “least favourable market”, and it now makes business sense to exit and export from China, Finnish major Nokia has told the government. In a letter written this June, Nokia cautioned that the “political risk” of operating in India may impact future investment decisions.
    [​IMG]

    Nokia urged the government to “act quickly to correct the wrong perception of India as a place for business”.

    The telecom multinational’s caveat came in the wake of fresh income tax disputes and delay in the refund of VAT. It is ominous in the current economic scenario in which foreign direct investment has become a trickle, institutional investors have been pulling out, and several investors have refused to take the plunge after wetting their toes.

    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.”

    Technically, a non-paper is an unofficial document. It was received by the finance ministry last month.

    It said that the non-refund of value-added tax 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”.

    Under an MoU signed with Tamil Nadu, the state was to refund the four per cent VAT Nokia pays on phones sold in the domestic market from its plant in the SEZ. The issue reached a flashpoint after currency fluctuations and China-Vietnam competition started eroding thin margins, especially in the low-end models.

    “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.”

    Asked for a comment on the document sent to the government, Nokia spokesperson Poonam Kaul said over the phone on Thursday evening: “How will I know (about the non-paper)? It may have been sent by Nokia Finland. We have no concerns with the government. We had some challenges, but that is a public issue. The tax matter is sub judice. We can’t comment.”
     
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  3. Ray

    Ray The Chairman Defence Professionals Moderator

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    It makes no sense to Nokia, but Samsung is taking over the market!

    One wonders why they do not have the same complaint!

    LG lead in white goods!

    No complaint heard there or even for their Mobiles.

    Why?
     
  4. Singh

    Singh Phat Cat Administrator

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    Samsung is doing well because it doesnt manufacture in India.


    Sent from my iPhone using Tapatalk 2
     
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  5. Ray

    Ray The Chairman Defence Professionals Moderator

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    Directly from Samsung.

    Manufacturing - Samsung in India - Our Businesses - About Samsung - Samsung
     
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  6. Twinblade

    Twinblade Senior Member Senior Member

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    Taxation issues sir. Every time companies face tax issues they cannot dodge, they threaten a pull out. Nokia isn't exactly overflowing with funds and India is their largest market as well as manufacturing base. If anything this current rupee depreciation has benefited them in exports, but then again, the retroactive taxation legislation that the Indian government wants to bring is like tap dancing in a minefield. A strong government like that in the UK and PRC can do it, but our limp wristed government can't.

    A lot of companies used tax loopholes to avoid paying taxes in India. The prime offender being a merger between Vodafone (a UK based company) and Indian division of Hutchison, which should have brought in considerable amount of cash for the GoI, instead through crafty dealings, that deal was signed off between Vodafone's dutch subsidiary and Hutch's Caymen island division. The government wants to retroactively tax that deal by allowing Indian tax authorities to imply retrograde and extra territorial provisions, but it will open a pandora's box by putting a lot of Indian deals under scanner, including software licensing deals for our IT industry. The Chinese implemented such proposals and nothing happened to them. If only we had a good leader who could assure the industry that such provisions would only be used sparingly in cases of tax avoidance and not regularly to milk FDI dry.

    That being said, I can sympathise with Nokia for their (Nokia's) MoU not being kept up at the government's end.
     
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  7. A chauhan

    A chauhan "अहिंसा परमो धर्मः धर्म हिंसा तथैव च: l" Senior Member

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    Nokia sales have been greatly affected by Samsung and other brands. Perhaps govt policies are an excuse to hide their own failures.
     
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  8. Singh

    Singh Phat Cat Administrator

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    India indeed is a taxation mess. Without GST, and other reforms we will plateau.

    Vodafone was not a taxation issue that involved India per se afaik, and then Murakhjee threatened to enact a retrospective law.
     
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  9. CrYsIs

    CrYsIs Regular Member

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    sob and TrueSpirit like this.
  10. Compersion

    Compersion Senior Member Senior Member

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    has anyone done a research into Hutchinson (hong kong) and its tax obligations with reference to Vodafone transaction. If not Vodafone it must be Hutchinson. Unless they have paid. Unless its a sovereign issue. Hutchinson made billion(s) in profit from their india investment. They did not reinvest anything from my understanding. I am sure they would act in good faith are not bad people. It wont be difficult if india spoke to Hutchison. It would be good to probe further where was the Hutchinson and Vodafone transaction done. In which jurisdiction. In that agreement is there a clause to covert tax liability. Something the indian mediation also ought to ask when it negotiates with Vodafone.
     
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  11. rockdog

    rockdog Regular Member

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    U r so smart, i think you forget you already gave the answer on another thread:

    http://defenceforumindia.com/forum/...rt-china-why-fdi-retail-kill-indian-jobs.html

     
  12. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    Newer Nokia phones are reportedly popular in India I doubt Nokia will leave
    Their largest market. Especially with future 3G 4g lte expansions in Asia
     
  13. Ray

    Ray The Chairman Defence Professionals Moderator

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  14. Ray

    Ray The Chairman Defence Professionals Moderator

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    I would not know.

    But they are doing exceeding well, even if they produce in small numbers, while Nokia, my favourite, is down in the dumps!
     
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  15. Tshering22

    Tshering22 Sikkimese Saber Senior Member

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    Well keeping aside Nokia's performance against Samsung and HTC, I think that they have a point.

    Our FDI is screwed up because of archaic tax laws. Investors need incentives other than just a ready to use manpower that India has and that entails two aspects:

    1- Corporate security

    2- Tax incentives

    3- Easier access to land/premise acquisition and other such operational hurdles.

    To start a business in India is a pain especially the level that these electronic giants operate.

    There is land issue, where somehow always the government officials end up assigning arable land to these manufacturers (thereby reducing our food production capability and increasing the prices), which the farmers for right reasons don't like. All non-arable and dead lands in the regions like Madhya Pradesh and the central Indian belt is lying useless.

    The government can do so much in making these desolate places into powerful factory and manufacturing hubs where there is no danger of environment degrading and at the same time thousands and thousands of people get jobs.

    You cannot just start making goods overnight.

    It takes time and dedication by a regime to start developing such an ecosystem.

    And India has a pathetic manufacturing ecosystem. China, Korea, Taiwan and now even upcoming nations like Vietnam, Malaysia and Indonesia are much better at this.
     
  16. amoy

    amoy Senior Member Senior Member

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    wasn't Nokia itself in sort of "precarious finance" so that it had to sell off major assets like its Finland hqtrs?

    Sent from my 5910 using Tapatalk 2
     
  17. cobra commando

    cobra commando Tharki regiment Veteran Member Senior Member

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    Meah ! Nokia Sucks, me love Samsung + Micromax onlee ! :bplease:
     
  18. Sridhar

    Sridhar House keeper Moderator

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  19. desicanuk

    desicanuk Regular Member

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    More bad news........
    August 25, 2013
    Walmart Puts India Expansion Plans On Hold

    Walmart, the world’s largest retailer by sales, has put its India expansion plans on hold as it deals with two compliance investigations and unease over the government’s rules for foreign investment in retail businesses. ...
    Time to kick out Congress led UPA!!
     

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