Tax evasion is becoming a hot topic in recent times and even in recent years, especially the personal tax evasion of artists and live broadcast practitioners, which has always become a hot news in society and caused countless discussions. In addition to personal tax issues, enterprises, especially multinational enterprises, also face many tax issues. This is particularly serious in India, which has a poor foreign business environment, and the Indian government has been making good use of the tax stick to protect its interests. As one of the biggest players in the Indian mobile phone market, Xiaomi has recently been unable to escape the blow of Indian taxation.
Not long ago, Xiaomi received a tax fine of 653 crore (about 560 million yuan). The Indian Tax Authority believes that between April 2017 and June 2020, Xiaomi's companies in India evaded a total of Rs 653 crore tariffs.
Why has the problem of the past few years dragged on until now? Because the Indian tax authorities found that Xiaomi's Indian subsidiary paid royalties to Qualcomm and Chinese Xiaomi, but this fee was not included in the price of imported products, it was suspected of violating India's customs law and relevant valuation rules.
Of course, xiaomi, as a multinational giant enterprise, also has a positive response to this. The basic content is: First, Xiaomi complies with local regulations in its global business. Second, these are past businesses, and Indian taxation is turning over old accounts. Third, this does not necessarily constitute the final result, xiaomi is still communicating with Indian taxation. Fourth, the lack of a clear consensus on whether royalties on concessions should be included in the import price of imported goods is a complex technical issue.
On the one hand, Xiaomi did not resist Indian taxes, but it also believes that its approach has a reasonable original. The Indian tax authorities, on the other hand, cite specific legal provisions indicating that royalties need to be included in the dutiable value of imported goods.
However, this is not a simple multinational corporate tax issue. In fact, at the end of 21 years, India conducted a wave of scrutiny against Chinese companies in the forecast, in addition to Xiaomi, including OPPO, VIVO, Foxconn and other companies. The Embassy in India also organizes special questions and answers on tax issues to explain india's business environment.
In 2014, Modi proposed a "Made in India" plan to increase the proportion of indigenous manufacturing in India from 15% to 25%. But the program didn't go well, and three years later, the proportion of manufacturing fell to 15 percent. One of the main reasons is India's poor business environment, according to the World Bank's Ease of Doing Business report, in 2014, out of 190 economies, India ranked 134th, and in 2017, it rose to 130, only 4 places. Even after several years of development, it will rise to 63 in 2020, but it will mainly improve in terms of business opening, construction permits and bankruptcy handling.
In terms of contract execution and taxation, 163 and 115 are ranked at the bottom of the global economy. Many international giants have suffered a tax stick blow in India, including Microsoft, HP, Google, Yahoo, Samsung, etc., and Xiaomi is just one of the new ones.
Prior to this, the offices of many Chinese companies had also been raided, and ByteDance had even frozen assets at one point. Coupled with the earlier ban on the APP developed by China in India, it can be seen that India's move is intentional.
Although Xiaomi disputed the fine, it may appeal. But its potential outlook is not very good. On the one hand, because tax filing in India is very difficult, Deloitte's report has said that it can take up to 8 years to conduct a full appeal to the Supreme Court in India, and there are many other costs, and the cost of settlement is much higher than litigation.
On the other hand, in the context of a bad international economic environment, governments are expanding tax sources to make up for spending, and at the end of last year, countries around the world raised the minimum tax rate to 15%, with a total of more than 130 countries signing, and even the famous tax haven Ireland was not spared.
According to the OECD's assessment, raising the global minimum tax rate to 15% could raise $150 billion in monthly corporate income tax revenues globally. Developed countries are still nervous as scheduled, and India will naturally not easily regress on the tax issue.
Xiaomi entered the Indian market with the slogan of "Make in India", in the 2017 year when it was required to pay taxes, Xiaomi was already the first in India, and later set up a factory in India to start production, most of the Xiaomi mobile phones in the Indian market are assembled and produced from Indian factories.
At present, Xiaomi's overseas business accounts for nearly half of its revenue, the main position overseas is Western Europe and India, and the rupee is even one of Xiaomi's capital measurement methods, which shows the importance of the Indian market. I am afraid that Xiaomi will eventually reach a settlement agreement with the Indian tax.
Whether it is the international market or the domestic market, Xiaomi still faces a lot of uncertainty!