Taiwanese company Foxconn is facing a tax investigation in China, seen as politically motivated

TAIPEI, Oct 23 (Reuters) – Foxconn (2317.TW), the main supplier of Apple Inc’s iPhones, faces a tax investigation in China, two sources close to Foxconn confirmed on Monday, saying they believed it had been uncovered. By a state-backed newspaper for political reasons related to the upcoming elections in Taiwan.

China’s state-backed Global Times newspaper said on Sunday that some of Foxconn’s key subsidiaries in China had undergone tax audits and that the China Natural Resources Administration had conducted field investigations into Foxconn’s land use in Henan and Hubei provinces and elsewhere.

The two sources, who requested anonymity due to the sensitivity of the matter, said several companies they did not name had come under review by Chinese authorities in recent months, but they believed only the Foxconn investigation was made public for political reasons.

The sources highlighted that the audits come less than three months before Taiwan’s presidential election and amid Foxconn’s campaign to expand production outside China.

The government of Taiwan, which China claims as its territory, often accuses Beijing of seeking to exert pressure, whether military or economic, to influence the results of its elections to ensure a favorable outcome for China.

Foxconn founder Terry Gou, who resigned as company president in 2019, is running as an independent for president.

The Global Times newspaper said in an English-language article late on Sunday that Jo could split the opposition vote, potentially ensuring victory for incumbent Vice President Lai Ching-te, who is already leading in the polls.

Beijing hates Lai, whom it believes is a separatist. He says only the people of Taiwan can decide its future, and Beijing has rejected his offers for talks.

Citing unnamed experts, the Global Times said that Cho’s candidacy would likely lead to further division in the island’s opposition camp, and that this would ultimately favor the ruling separatist Democratic Progressive Party’s candidate, Lai Ching-ti.

Expansion outside China

Foxconn’s audits have not been officially announced by any Chinese government department.

Local authorities, which the Global Times said were conducting audits and investigations in Henan, Hubei, Guangdong and Jiangsu provinces, did not immediately respond to Reuters’ faxed requests for comment.

Foxconn, formally known as Hon Hai Precision Industry Co Ltd, employs hundreds of thousands of people in China and is a major investor there, and is regularly praised by Beijing as an example of the success of Taiwanese investors in the country.

However, the company has been seeking to diversify its industrial base outside China, and the first source told Reuters they viewed the review as a “warning” to Foxconn.

“Their economy is not in good shape. It is a warning, seeing big companies like us moving to India,” the source said.

The first source said, “They want you to take sides. Either you stay with us or you leave.”

The second source said the review was “unexpected” and relatively “unusual.”

Foxconn said in a statement on Sunday that legal compliance is a “fundamental principle” of its operations, and that it will “actively cooperate with relevant units in relevant businesses and operations.”

Foxconn said Monday it had no further comment.

China’s Taiwan Affairs Office did not immediately respond to a request for comment. Taiwan Prime Minister Chen Chien-jin offered his government’s assistance to Foxconn, but did not provide details.

Foxconn shares closed 2.9% lower on Monday, underperforming the broader market (.TWII), which fell 1.2%.

“War or peace” elections.

Billionaire Foxconn founder Guo trailed in the polls despite running a high-profile campaign for president.

He accused Taiwan’s ruling Democratic Progressive Party of pushing the island to the brink of war with China through its hostile policies, and that it alone is capable of maintaining peace through its extensive commercial and personal contacts in China and the United States.

Joo’s campaign spokesman, Huang Shih-hsiu, referred questions about Foxconn’s investigation into the company, saying Joo was no longer a board member and was now just a shareholder.

But the Foxconn investigation has now become an election issue.

What Taiwanese companies fear most is Taiwan-Taiwan instability, Hu Yu-er, the presidential candidate for the Kuomintang, Taiwan’s main opposition party, who described the election as a “war or peace” vote, said on Monday when asked about the Foxconn investigation. China.

Speaking at a campaign rally on Sunday, Lai, the Democratic Progressive Party candidate who is leading in opinion polls, said the Chinese report on the investigation was “unexpected” and “unfortunate.”

“Taiwanese enterprises have always contributed to China’s economic development,” Democratic Progressive Party spokesman Zhang Chieh-hao said on Monday.

“However, the Chinese Communists often use Taiwanese companies as bargaining chips for political pressure or election interference against Taiwan.”

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