Nokia cries foul over $ 2.5 bn tax demand by Indian authorities, calls it unacceptable

Nokia-logo-psd43421Finnish phonemaker Nokia Corp is crying foul after Indian tax authorities raided its offices in Chennai last month. On Tuesday, Nokia said that the tax raids are “excessive, unacceptable and inconsistent with Indian standards of fair play and governance,” reports The Wall Street Journal.

The Income Tax department is has reportedly laid claim to nearly $ 2.5 billion (Rs 13,000 cr) in tax money from Nokia, which has been struggling to pull its bottom line up. In the third quarter, Nokia reported a $754 million operating loss on a topline of $9.49 billion. Revenue officers have submitted an interim report on the Nokia case to the Government.

Taxmen had asked Nokia to cough up $ 500 mn in taxes and raided its Chennai facility last week.

The authorities suspect that the company has not paid tax in India for the software it runs on its mobile phones, a media report citing unnamed officials said. The phonemaker, counts India as one of its largest markets sells millions of handsets in the country which has over 900 million mobile phone subscriptions.

Earlier this month, while releasing the annual tax figures, Finance Minister P Chidambaram had stressed that revenue officers need to meet tax targets for 2012-13. With less than 2 months left for the year to come to a close, the government is likely to fall short of its tax revenue growth target. The government wanted to grow tax revenues this year by 27 %, however, for the first 10 months of the year, net direct tax collection which includes income tax and corporate tax, went up only 12.49 % year on year.

Other prominent cases in India

IBM India Private Limited

For the assessment year of 2008-09, Tax authorities have demanded IBM to pay up over $200 million dollar. The technology giant is fighting a legal battle in Karnataka High Court which recently asked IBM to deposit 50 % of the amount with the authorities before March 31. This case is likely to be escalated to higher courts.

Google India Private Limited
Google has been slapped with a $14.5 million penalty for alleged tax evasion for the year of 2008-09. The Tax department said that Google has misled the authorities by shifting profits that arise out of India to offshore tax havens like Netherlands and Ireland. More on that case here. Google has moved to the Income Tax appellate tribunal. The case is likely to end up in the courts.

Telecom major Vodafone was asked to pay more than Rs 14,000 cr in tax and interest for its acquisition of Hutchison Essar by the UK based company for $11 billion. The tax authorities contend that transactions involving Indian assets must be taxed in India.

The Supreme Court later ruled in favor of the IT department. In the previous budget, the government introduced a retrospective clause which made it mandatory for companies to pay tax on acquisitions involving Indian assets.

Following a massive outcry from the industry, a committee headed by Parthasarathi Shome, the director and CEO of Indian Council for Research on International Economic Relations (ICRIER)to examine the ammendment, said that retrospective tax demands must be waived off. The waiver was only on demands made in retrospect.

Companies like Akamai Technologies, MSC Software Coropration, Microsoft and others are also entangled in various legal battles in different courts in the country.

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