TN refunds tax to fuel Nokia's profit

Link: 1. The Public Price of Success
Link: 2. OTHER FACTS ABOUT NOKIA
Link: 3. Nokia SEZ: Public Price of Success


The Tamil Nadu government is using public money to help mobile phone giant Nokia, which has set up a telecom manufacturing special economic zone (SEZ) at Sriperambudur near Chennai.

The 'help' is in the form of reimbursement of value- added tax (VAT) that the Finnish multinational has to pay on phones sold in the domestic market in the SEZ meant for exports. The clause of reimbursement of VAT was included in the memorandum of understanding (MoU) the state had signed with Nokia in July 2005. This and several other fiscal incentives are in addition to concessions that Nokia gets under the SEZ scheme.

The total refund of VAT is assessed at over Rs 650 crore so far - this is almost equal to Nokia's investment in this factory.

The details of the deal, which had remained shrouded in mystery till now, have become available through the Right to Information (RTI) Act at the end of a three-year long battle waged by Chennai-based Citizens' Research Collective.

The special tax- break that TN gives to Nokia is two- fold - refund of taxes paid on phones sold within the state, and refund of VAT paid in other states. The clause relating to TN taxes reads, "All sales from the SEZ to domestic tariff area (DTA) shall attract applicable local sales tax (LST) and central sales tax (CST), as the case may be. However, the LST (including surcharge, re- sale tax, turnover tax, etc.) and CST so paid will be refunded to Nokia by the state government.

A suitable mechanism would be worked out to enable Nokia to get the refund every month without any loss of time. Such output LST and CST will be refunded to Nokia for a period of 10 years from the date of commercial production." On refund of VAT, the agreement reads, "Sales from the SEZ to the DTA will be liable for VAT and CST. Such VAT and CST will be refunded to Nokia by the state government in terms of the mutually agreed mechanism for the residual period (10 years minus period for which waiver availed in the pre-VAT scenario)."

However, these refunds cannot exceed "the investment made by Nokia in eligible fixed assets within three years of signing of MoU." When contacted for comment, communication officials of Nokia said authorised spokesperson was not available for comment. Another communication person merely said, "The MoU is a confidential and classified document." The VAT in different states ranges from four to 12.5 per cent. Even if it is taken at four per cent, the reimbursements to Nokia would be very large given the company's leadership position in the Indian handset market. The company's sales in India were worth Rs 3,578 crore during 2007-08.

"This means the TN government would have paid Rs 143 crore as VAT refund to Nokia for this year. It is not known how much of Nokia's sales are in TN compared to the entire country.

But if we assume it is about six per cent as proportionate to the total population of India, Rs 134 crore becomes the public price paid for the privilege of having Nokia in TN during this particular year," Citizens' Research Collective pointed out in its report released on Wednesday.

"In effect, the TN government has offered Nokia to pay for its investments and allow sales in the world's fastest growing mobile phone market," the report said.

Courtesy: Mail Today
Dinesh C. Sharma  New Delhi, June 18, 2009

Rich Must be Prepared to be Taxed More: Chidambaram

Home Minister P Chidambaram, who as Finance Minister had slashed taxes, today suggested that rich should be taxed more even though "many people" would not like the idea.

"We must raise the tax revenue to defend (the expected aggregate decline of resources). I know many people won't like this. But I think, I can summon the courage to make the statement," he said addressing a function of All India Management Association here.

Chidambaram as the Finance Minister between May 2004 and November 2008 had slashed taxes and was credited with presenting a 'dream budget' in the initial years of his tenure in the Finance Ministry.

"I am (was) the Finance Minister who slashed your tax rates. Therefore ... You must be prepared to pay higher tax rates, especially the rich must be prepared to pay higher tax," he said.

The Home Minister said in Europe rich people were getting together to say, "please tax us more".

His suggestion is also in line with the move by US President Barack Obama who has proposed to tax rich for taking the American economy out of the financial troubles.

"Certainly this is not the place, nor I am the person to say what tax should be raised. But we should seriously consider how to raise the tax revenue of the country," Chidambaram said, even as preparations for the next Budget (2012-13) have started.

Chidambaram said that according to the Approach Paper (12th Plan), tax revenue is expected to rise from 7.4 per cent in the current year to 8.9 per cent next year and the non-tax revenue is expected to decline.

But, he said, "the worrying part" is aggregate resources, that include tax revune, non-tax revenue, non-debt capital revenue and borrowings, are expected to decline from 14 per cent in the current year (2011-12) to 13.11 per cent as a percentage of GDP.

The Home Minister said while the actual difference would be marginal because of larger Gross Domestic Product, as a percentage of GDP, aggregate resources would decline.

India: a new freedom struggle to combat tax evasion

Tax justice played a major part in India's struggle for independence from the British. Gandhi's march against the Salt Tax was a hugely symbolic part of his protest against oppression. 

Contemporary India is a hugely divided and unequal society. The majority of the rural population live in poverty, providing a potent breeding ground for violent resistance. Public services are woefully inadequate, not least because tax evasion has become rampant amongst the upper and middle classes.

The following statement has just been issued by Indian campaigners:

Our Indians' Money - 70 Lakh Crores Rupees* In Swiss Bank 

1) Yes, 70 lakhs crores rupees of India are lying in Switzerland banks. This is the highest amount lying outside any country, from amongst 180 countries of the world, as if India is the champion of Black Money.

2) Swiss Government has officially written to Indian Government that they are willing to inform the details of holders of 70 lakh crore rupees in their Banks, if Indian Government officially asks them.

3) On 22-5-08, this news has already been published in The Times of India and other Newspapers based on Swiss Government's official letter to Indian Government.

4) But the Indian Government has not sent any official enquiry to Switzerland for details of money which has been sent outside India between 1947 to 2008.. The opposition party is also equally not interested in doing so because most of the amount is owned by politicians and it is every Indian's money.

5) This money belongs to our country. From these funds we can repay 13 times of our country's foreign debt. The interest alone can take care of the Center s yearly budget. People need not pay any taxes and we can pay Rs. 1 lakh to each of 45 crore poor families.

6) Let us imagine, if Swiss Bank is holding Rs. 70 lakh Crores, then how much money is lying in other 69 Banks? How much they have deprived the Indian people? Just think, if the Account holder dies, the bank becomes the owner of the funds in his account.

7) Are these people totally ignorant about the philosophy of Karma? What will this ill-gotten wealth do to them and their families when they own/use such money, generated out of corruption and exploitation?

8) Indian people have read and have known about these facts. But the helpless people have neither time nor inclination to do anything in the matter. This is like "a new freedom struggle" and we will have to fight this.

9) This money is the result of our sweat and blood.. The wealth generated and earned after putting in lots of mental and physical efforts by Indian people must be brought back to our country.

10) As a service to our motherland and your contribution to this struggle,please circulate at least 10 copies of this note amongst your friends and relatives and convert it into a mass movement.


* 1 crore [Hindi karor] is equal to 10 million rupees or US$2.2 million. At current exchange rates 70 lakh crore rupees is equivalent to US$1.5 trillion. This figure does not originate from TJN. Our colleagues at Global Financial Integrity have placed India within the top ten of countries suffering from illicit financial flows 


http://www.gfip.org/storage/gfip/economist%20-%20final%20version%201-2-09.pdf