India's tax authorities continue making life difficult for multinationals from many different sectors and of many different sizes. For a country that needs more businesses to move there in order to create more jobs in higher value industries, the amount of protectionism and regulation that hinders job creation is astounding. One example that has dragged out for the past few years is that of Nokia. The device maker was just hit with a new $414 Million demand from Indian tax authorities and is, as usual, disputing the claim of unpaid sales taxes. Authorities allege that phones produced in Chennai, in southern India, were not exported and instead were sold domestically, thereby making the sales taxable. In addition, this new issue adds to the previous issue surrounding the transfer of Nokia's manufacturing plant in Chennai that currently employs 30,000 people and was due to move to Microsoft's control as part of the $5.4 Billion deal for Nokia's phone business before being stopped by Indian tax authorities due to other outstanding tax payments.
In the past, other companies such as IBM, Shell, Vodafone, and most recently, Cairn Energy, have all had significant disputes with tax authorities that have further dented India's reputation as a destination for new business investment. All these problems simply exacerbate the issues India is currently having while it attempts to modernize its economy and help bring a large number of people out of poverty and into a more wholesome economy. If India continues inventing bogus claims and overcharging multinational corporations on tax payments, it will be unable to leave its current position as an economy stuck in an attempted transition from third world to first world economy.