'Nokia changing accounting, business model to avoid taxes'

The Income Tax department Wednesday said the Indian subsidiary of Finnish mobile handset-maker Nokia has changed its accounting model and is reorganising its existing business model to avoid direct and indirect taxes.

"It is observed that the company has changed its accounting model and also it is in the process of reorganising the existing business model to bypass certain direct and indirect tax liabilities," the department said in a statement after its "survey" of Nokia's corporate office in Haryana and factory at Sriperumbudur, near here.

According to the department, some more clarifications have been sought from Nokia and the evidence gathered needs further investigation before a final decision is reached on the company's tax liabilities.

A team from the tax evasion detection wing of IT department Tuesday began a "survey" at the premises of Finnish handset-maker Nokia's Indian subsidiary which ended  Wednesday morning.

In IT parlance, "search" and "survey" are different terms.

In a search operation, the business and residential premises are searched and the officials have the power to seize documents.

However, a survey is done only in the business premises when there is a suspicion of tax evasion.

IT officials are confident that prima facie there is a strong case against Nokia for evading tax to the tune of around Rs.2,500 crore.

"We have a prima facie case against Nokia's Indian subsidiary. For the past six years the company has paid around Rs.20,000 crore-Rs.25,000 crore as royalty to its Finnish parent without deducting tax at source," a senior official in the investigative wing of the IT department told IANS.

According to the department, Nokia India has been downloading software from its parent company to make the handsets here.

Nokia's Indian plant near here makes over 20 different models and is one of its largest global facilities involving an outlay of around $300 million.

IT officials said Nokia executives had been asked to come Jan 16 for further clarifications.