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Foxconn Shares Plummet Following Chinese Report on Tax Audit and Land Use Investigation
Updated: Dec 30, 2023
[Edited] Taiwan's Foxconn, a major supplier of Apple's iPhones, is currently under investigation for tax-related issues in China. Two sources close to Foxconn have confirmed the probe, stating that they believe it was disclosed by a state-backed paper for political reasons tied to Taiwan's upcoming elections.
The state-backed Global Times tabloid in China reported that some of Foxconn's key subsidiaries in China were the subject of tax audits. Additionally, China's natural resources department conducted on-site investigations on land use by Foxconn enterprises in Henan, Hubei, and other provinces.
While several companies have been audited by Chinese authorities in recent months, the sources believe that Foxconn's probe was made public for political reasons. These audits come less than three months ahead of Taiwan's presidential election and amidst Foxconn's efforts to expand production outside of China.
The government of Taiwan, which China claims as its own territory, often accuses Beijing of exerting pressure, whether military or economic, to sway the outcome of its elections in favor of China. Foxconn's founder, Terry Gou, who stepped down as company chief in 2019, is standing as an independent candidate for president.
The Global Times suggested that Gou's participation in the elections could potentially split the opposition vote, favoring the current Vice President Lai Ching-te, who is leading in the polls. Beijing strongly opposes Lai, whom they believe is a separatist. Lai, on the other hand, believes that only Taiwan's people can decide their future, and Beijing has rejected his offers of talks.
The audits of Foxconn have not been officially announced by any Chinese government department. Local authorities conducting the audits and probes in Henan, Hubei, Guangdong, and Jiangsu provinces have not responded to 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. However, the company has been actively diversifying its manufacturing base outside of China, which some view as a "warning" from the Chinese government.
In response to the situation, Foxconn stated that legal compliance is a fundamental principle of its operations and that it will actively cooperate with the relevant units on the related work and operations. The Taiwan Affairs Office of China has not yet responded to requests for comment.
Taiwan Premier Chen Chien-jen has offered his government's help to Foxconn, although no details were provided. Following the news, Foxconn shares closed down 2.9% on Monday, underperforming the broader market's 1.2% fall.
As the probe into Foxconn unfolds, it has become an election issue in Taiwan. The presidential candidate for Taiwan's main opposition party, the Kuomintang, Hou Yu-ih, emphasized the fear of instability between Taiwan and China among Taiwanese firms. Meanwhile, the ruling Democratic Progressive Party's candidate, Lai, expressed surprise and regret over the Chinese report on the investigation.
Foxconn, a major supplier of Apple's iPhones, is facing a tax probe in China.
The probe is believed to have political motives tied to Taiwan's upcoming elections.
The audits come as Foxconn aims to expand production outside of China.
The Taiwanese government frequently accuses China of exerting pressure to influence election outcomes.
Source: REUTERS