By Michael Northcott Wednesday, 09 January 2013

Tax officials raid Nokia's India factory looking for £340m

Indian tax officials have raided the Finnish phone maker's factory in Chennai, over outstanding tax payments.

Nokia could really do without a massive, and unexpected, tax bill right now. With shrinking market share and sputtering sales figures, the £340m that Indian tax officials believe they are owed is definitely a spanner in the works.

Reports say that officials went in to the Chennai factory – Nokia’s largest – but what exactly they were hoping to find is anyone’s guess. Gold bullion marked ‘Withheld Tax’, perhaps? 

Nokia was quick to trot out a statement saying that it always abides by ‘applicable laws and rulings in the countries where we operate’, and explained that it is co-operating with Indian authorities, giving them ‘the necessary information the help in their enquiry’.

Still, shareholders are obviously panicked: the price of shares in the company fell by around 6% in early morning trading on Wednesday. India is one of the fastest growing markets for mobile phones in the world, and one of the few regions in which Nokia remains a market leader. So a fall out with authorities is far from desirable.

Still, Nokia is not the only Western firm to find itself under fire from the taxman in India – just a few days ago, the UK’s Vodafone was ordered to pay around $2bn worth of backdated taxes. 

Vodafone’s investors have complained that the tax system in India lacks clarity and is making it difficult for foreign firms to get a foothold in the market. A legal wrangle between the taxman and Vodafone has been ongoing for about five years. But then, it would be hard to beat the cosy relationship that Vodafone has with the UK’s HMRC, of course.

Elsewhere in the phones/telecoms industry, Samsung is having a field day. Late on Tuesday night, the firm revealed record profits in the final quarter of 2012, thanks mainly to soaring sales of its mobile handsets.

A war between Samsung and Apple as the two leading smartphone makers continues to rage, but for now it seems the South Korean firm is in the lead. Profits rose 88% to $8.3bn compared with the same quarter the previous year, on revenues that rose 18% to $52.7bn.  

If only Nokia could have a piece of that pie…

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