Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s India tax woes seem to be hurting its local trade partners also. Foxconn India will soon offer a voluntary retirement scheme (VRS) to its employees at the company’s Indian division. The division is largely dependent upon Nokia for its business and has been marred by Nokia’s tax problems in India and authorities’ decisions on those tax issues. Foxconn’s Chennai facility will now offer a VRS, according to a report from ET, which cites various sources.
“They [Foxconn management] have said that business is dull and production low because of Nokia [India’s] tax problem. They said they are likely to offer VRS to us,” said a senior employee of Foxconn India.
Business down for Foxconn
Foxconn India, established in the Special Economic Zone (SEZ) near Chennai eight years ago, primarily manufactures mobile phone panels for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) India. One of the employees said that some of the workers have already resigned over the past two or three months, and management has partially withdrawn transportation facilities. There was no confirmation over the number of employees who left over the period of three-four months.
According to a source, around 450 employees were offered paid leave and have been asked to come to work only once a week. The senior employee said that these employees are paid full salary for now but will not get any incentives, such as attendance and production incentives and bonuses.
The Foxconn facility employs around 1,700 employees, which is far fewer compared to the 6,000 workers three years back when production was in full swing. Those who turned out were usually trainees and contractual workers.
Nokia seeks international arbitration
Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) India is handling two tax rows, due to which Microsoft Corporation (NASDAQ:MSFT) did not include the Chennai facility in the deal in which it acquired Nokia devices and services. Instead, the software giant has hired the facility on a contract basis, and Nokia has offered voluntary retirement to its employees.
The Finnish company, to resolve the tax dispute, has asked for international arbitration by sending a request to the prime minister under the bilateral treaty between the two countries.
“As one of our actions, Nokia has sent a letter under Finland India Bilateral Investment Treaty (BIT) to the Hon’ble Prime Minister of India. The letter seeks for amicable resolution of the current tax disputes,” a Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) spokesperson said.