Nokia, Finnish phone maker, was raided by Indian tax officials on January 8th of its production unit in the southern city of Chennai, one of the company’s biggest facilities. And it was alleged by a senior Indian tax official that the investigation related to allegations that Nokia may have evaded around 30 billion rupees ($543 million) in taxes. After the news was released, Nokia shares fell 2.3 percent to 3.20 Euros by 1142 GMT reported by Reuters. PwC, providing auditing and tax services to Nokia in India, was hence called in for questioning on the Nokia tax case by the local authority.
1. Tax disputes are common around the world
Tax disputes are becoming more and more common as governments faced with financial deficits due to the slow economy. As for Nokia’s case, it was suspected a default in tax deducted at source on payments to other countries against software supplies. And prior to Nokia’s case, Vodafone, British telecommunications carrier, was also pressed for payment of $2 billion in disputed taxes in India on its previous acquisition of mobile telecom assets. Therefore, it is simply impossible for company to avoid tax disputes during its operation. The only solution to facing such situation is to deal with it wisely.
2. You don’t intend to evade tax doesn’t mean you are not
Tax is a highly complex issue with numerous articles and documents. If certain conditions are met according to a certain article of the tax law, a company can soon be involved in investigations and may later be accused of evading tax regardless of its intention. As in this case, the relevant person in charge said that it always observes “applicable laws and rulings in the countries where we operate”. However, it was still involved in tax evasion charges and it remained unclear how this would affect the productivity of the factory. We have just seen too many “innocent” companies trapped in tax disputes owing to a variety of reasons. And we, Hwuason Lawyers, suggest company pay special attention to the tax issues and comply with the tax law to secure the best outcome.
3. Struggle for you own legal rights
Sometimes the tax law is quite confusing actually and company doesn’t know what to do. A natural idea that a company may come up with is to resort to the local tax authority for advice. In fact, the local tax authority is not necessarily right all the time and may not always favor the taxpayers since it needs to gain revenues. So the best solution for a company to defense its legal rights is to seek a tax lawyer’s advice since he is sure to act on behalf of the company’s interests. And the tax authority’s decision may be challenged through legal procedures provide with solid legal basis.
For more information or advice on the above tax issues, please feel free to contact us by Tianyong Liu (firstname.lastname@example.org) or Lingyan Hu (email@example.com). You can visit our website at www.hwuason.com or our tax blog at www.chinataxblog.com.
Hwuason Lawyers, a prominent law firm with a focus on taxation, are committed to providing comprehensive tax law services including international tax, tax consulting, tax planning, tax incentives, tax controversy, etc. And we are granted ALB China Law Awards and Chambers China Awards respectively in 2012 for our excellent performance in taxation.