Column : From Foxconn to Nokia, and more
Now imagine what would happen, to Foxconn as well as to a host of other Chinese manufacturers, if the Chinese taxman were to slap a transfer pricing case on it and argue that a part of the profits Apple was making was nothing but underinvoicing of exports by Foxconn? Apple would think twice about getting manufacturing done by Foxconn, that’s what. Yet it appears that’s what the taxman in India is in the process of doing in the case of the mobile phones exported by Nokia from its assembly operations near Chennai—while a formal tax notice is yet to be served, those in the know say the tax demand is likely to be in the region of R13,000 crore.
The big difference between Foxconn and Nokia, of course, is that while the latter is a subsidiary of the parent Finnish firm, there are no ownership ties between Apple and Foxconn, but the principle is the same: how do you impute a fair value to the