Nokia vows to pursue India tax fight

NEW DELHI - Struggling Finnish mobile giant Nokia said Saturday it would fight an appeal against a decision by India's tax department to slap the company with a demand for hundreds of millions of dollars.

Nokia is the latest multinational to be embroiled in a tax row with Indian authorities, who are chasing alleged tax delinquents to reduce a hefty budget deficit.

Indian tax officials say they are seeking around 20 billion rupees (S$447 million) from the once biggest global mobile phone maker spanning five financial years from 2006-07.

"Nokia is disappointed by the decision of the commissioner of income-tax appeals, and will now examine all options open to it," the company said in a statement.

"These include taking the case back to the Delhi High Court," it said.

"Nokia will act quickly and decisively to protect its interests," said the company.

The alleged tax evasion involves software royalty payments to Nokia's parent, on which 10 per cent tax should have been deducted and paid to Indian authorities.

The high court had initially stayed the tax demand and then asked Nokia to approach the commissioner of income-tax appeals.

Nokia insisted in the statement it was "in full compliance with local laws" as well as the bilaterally negotiated tax treaty between the governments of India and Finland.

Taxmen earlier this year raided one of Nokia's manufacturing plants in the southern city of Chennai as part of their investigation.

Nokia, which began operations in India in the mid-1990s, had protested to India over the raid, slamming the action as "excessive" and "inconsistent with Indian standards of fair play".

India - one of the world's fastest-growing mobile phone markets - is Nokia's second-largest market, with the Chennai factory producing over 20 different models.

Last month, the Helsinki-based company unveiled in New Delhi a US$99-touchscreen smartphone as it battles to gain traction in India and other emerging markets to reverse falling sales.

British mobile network firm Vodafone is among other companies embroiled in a tax dispute with Indian authorities.

Vodafone is fighting a multi-billion-dollar tax bill from Indian tax authorities over its 2007 purchase of a stake in a domestic telecommunications company.

India's finance minister P. Chidambaram has vowed to clamp down on tax evasion to help to lower the nation's burgeoning deficit.

But in the face of alarm among international investors about what they see as arbitrary tax demands, he has also said he wants "clarity on tax laws" and for taxes to be collected in a "non-adversarial" way.

B.M. Singh, former chairman of the Central Board of Direct Taxes, told India's Mint newspaper that resolving the row would be a long process.

"Nokia has the option of approaching the appellate tribunal and the high court" or seeking to settle the matter under the bilateral tax treaty, he said.