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Nokia's share price drops after Indian tax raid

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As if it needed more bad news, ailing Finnish handset maker Nokia saw its shares decline further this week after Indian tax officials raided the Nokia factory in Chennai, India, apparently looking for unpaid taxes amounting to $545 million (€418 million).

According to a report by Management Today, tax officials in India believe they are owed this amount, while Nokia issued a statement saying it always abides by "applicable laws and rulings in the countries where we operate." Nokia noted in its statement that it has been in the Indian market since 1995 and that it is co-operating with Indian authorities.

Already facing declining market share in the face of fierce competition from the likes of Apple and Samsung, the last thing Nokia needs now is a larger tax bill. The handset maker has been banking on its new line-up of Windows Phone 8-based smartphones to revive its fortunes, and although adoption of the new Lumia 800 and 920 devices has been encouraging the Finnish company is still in a fragile position.

Meanwhile, Nokia announced a deal with Avanade, a business technology solutions and managed services provider to get more of its Lumia phones into the hands of business users. According to The Next Web, Avanade will create and deliver packaged Lumia devices and applications and services to large enterprise customers.

Nokia was the second European company active in the mobile sector to be hit by Indian tax claims this week: Vodafone received a tax bill of around $2.2 billion (€1.69 billion) from the Indian government relating to its acquisition of Hutchison Whampoa's stake in what is now known as Vodafone India. Vodafone and the Indian government have been arguing over the tax bill for years.

In January 2012, India's Supreme Court ruled in Vodafone's favour in the dispute, noting that the tax was not applicable because the deal   took place between two foreign companies. Then in March 2012 the Indian government honed on using a retrospective tax amendment from 1962 to get the tax from Vodafone and in other similar deals.

Vodafone told the Daily Telegraph it received the demand from the Indian government but said there was no deadline given for a payment.  "This reminder relates to capital gains tax arising from the sale of assets by Hutchison Whampoa to Vodafone in 2007," the company said. "Vodafone has replied to this reminder, stating that it continues to believe that no tax is payable on the above transaction."

For more:
- see this Management Today article
- see this Bloomberg article
- see this Daily Telegraph article
- see this The Next Web article

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