China Launches Foxconn Tax Investigation: "Shaking Corporate Trust" vs "Routine Inquiry"

Targeting Founder Running in Taiwan Presidential Election?
Foreign Media Focus on Investigation and Detention of Foreign Companies
Chinese State Media: "Taiwan Exaggerates Background"

Amid the tax investigation of Taiwan's Foxconn by Chinese authorities, speculation about the background and repercussions is growing. Taiwanese media pointed out that the purpose is to interfere in the local presidential election scheduled for January next year, while foreign media expressed concerns that market confidence could be shaken, mentioning the successive detentions of foreign company officials. Chinese state media rebutted these claims, stating that the intermittent tax inspections were conducted normally and that some parties are exaggerating the background.

According to Chinese economic media Caixin on the 23rd, Foxconn stated in a press release that more than one of its subsidiaries is under investigation by Chinese tax authorities, but the reason for the investigation is unclear. The company said it is actively cooperating with the investigation and that it is currently unable to accurately assess the impact of the investigation on the company.

[Image source=Yonhap News]

China's Global Times cited sources the previous day reporting that tax authorities recently conducted tax inspections on Foxconn's key branches in Guangdong Province, Jiangsu Province, and other areas. At the same time, the Ministry of Natural Resources is also known to have conducted on-site inspections of Foxconn land in Henan Province, Hubei Province, and other regions. Caixin reported that Foxconn has received numerous tax incentives, including exemptions from import duties on production materials and value-added tax on product exports in Zhengzhou and other locations, consumption tax exemptions, corporate income tax exemptions for the first two years before investment, and a 50% reduction in income tax for the third to fifth years.

Taiwanese media such as The Liberty Times view this investigation as targeting Terry Gou, the founder of Foxconn who has declared his candidacy for the Taiwan presidential election. If he enters the race, opposition votes would be split, benefiting the current ruling Democratic Progressive Party (DPP). Considering that Terry Gou consistently polls around 10% support, his decision not to run would favor Hou You-yi, the Kuomintang candidate with pro-China leanings.

Foreign media pointed out that this investigation could undermine the trust of foreign companies operating in mainland China. They also reported that prior to this, the Shanghai office of WPP Group, a British global advertising company, was raided by public security authorities, resulting in the arrest and detention of one executive and two former employees. According to sources, on the 23rd, WPP dismissed the executive on bribery charges and launched an internal investigation. Additionally, Chinese authorities recently officially charged an executive of Japan's Astellas Pharma with espionage, and in March, detained an employee of a Japanese metal trading company.

Bloomberg noted that regulatory authorities often do not explain the official reasons for investigations, and this lack of transparency unsettles foreign company executives investing in China. It also emphasized that the specific charges against the Japanese trading company employee detained in March remain unclear.

Chinese state media Global Times (GT) stated that the tax investigation of Foxconn is a normal, intermittent procedure and accused Taiwanese media of exaggeration, denying any political interference. However, citing an anonymous expert, it also evaluated that "Terry Gou's candidacy is driven by a billionaire's obsession to become a regional leader or by pressure from the United States or the Democratic Progressive Party (DPP), forcing him to run despite slim chances of victory."

This content was produced with the assistance of AI translation services.