Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has threated to pull operations out of India, according to a report in the Indian Express. The Finnish handset maker has been dealing with tax problems there for much of this year.


Nokia faces off with India

The newspaper cites a letter written in June in which Nokia said that the “political risk” associated with doing business in India could have an impact on the company’s future decisions about investments. The company said Indian officials should “act quickly to correct the wrong perception of India as a place for business.” It also called India “the least favourable market.”

The paper which is dated June points to the decision made by the Tamil Nadu government not to refund the value-added tax. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) goes on to say that the decision makes it “more cost efficient” for it to transfer the manufacturing of its phones to China and then import them to the Indian market.

A memorandum of understanding which Nokia signed with Tamil Nadu state indicated that the state would refund the four percent VAT which Nokia pays on phones sold in the Indian market from its plant in the country.

Nokia negotiating with India

The company did not confirm the contents of the report in the Indian Express to The Wall Street Journal. However, R. Jai Krishna and Sven Grundberg report via The WSJ’s Digits blog that a spokesperson for the company said they have been holding discussions with the Indian government. He said the discussions deal with the central government and state governments in India and how “greater clarity” can be brought to India’s business environment.

The negotiations come in the wake of May’s dismissal of Nokia’s appeal in connection with its tax issues. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) isn’t the only international company to consider cutting ties with India. ArcelorMittal (NYSE:MT) cut plans to build a factory in Orissa state. Before that, another steelmaker, Posco, also scrapped plans to build a plant there.