The Indian smartphone market is dominated by Chinese brands like Xiaomi, OnePlus, Oppo and Vivo. And they all had their run-ins with the Indian tax authorities. Previously, Xiaomi, Oppo, OnePlus and even telecoms equipment maker Huawei faced fire for alleged tax fraud in India.
Now Vivo left out is also facing music.
The Indian government has carried out searches of more than 40 locations in Uttar Pradesh, Madhya Pradesh and some southern states in connection with alleged money laundering by Vivo Mobile Communications and some other Chinese companies.
The Enforcement Directorate’s raids are an extension of the general investigation against Chinese companies. The searches were carried out in accordance with the provisions of the Money Laundering Prevention Law (PMLA).
Vivo Mobile Communications’ local units were under the radar as part of the investigation into other China-based companies. An inquiry against Vivo was opened in April this year to detect whether there were ‘significant irregularities in ownership and financial reporting’.
Currently, Chinese brands represent four of the top five smartphone vendors in India by shipments. At the end of the first quarter, Vivo has around 15% of market share in the country, and in fourth place behind Xiaomi, Samsung and Realme.
Predictable response from Vivo and China
Every time a Chinese company is raided, it usually claims that it was cooperating with the authorities, even when some typical Chinese official is quoted by state-backed media as saying such raids do not help boost investor confidence in India. This time, too, is no different.
Vivo said in a statement, “As a responsible company, we are committed to fully complying with the laws of India.”
Meanwhile, Ding Jihua, deputy director of the Beijing New Century Academy on Transnational Corporations, was quoted as saying (opens in new tab)“These frequent investigations targeting Chinese companies are affecting Chinese investors’ confidence in the Indian market.”
Everything feels a little orchestrated. Well, the cases against Chinese companies in India are not ordinary or small. For example, Xiaomi received a tax notice of Rs 653 crore (approximately $87 million) for alleged non-payment of royalties and license fee in the amount of its imports. The Directorate of Revenue Intelligence (DRI), which monitors companies’ tax violations, said Xiaomi India evaded customs duties through understatement.
The raids on Huawei also revealed that the group had made inflated payments against receiving technical services from its related parties outside India. The company could not justify the genuineness of obtaining such alleged technical services. His financial impropriety amounted to more than Rs 400 crore. There was also a case by the Directorate of Enforcement against a company related to Oppo. Oppo’s Chinese distribution partner was penalized hundreds of crores by the ED in Hyderabad.
Did Vivo employees flee India?
Meanwhile, the Indian media is full of reports that two top Vivo directors fled India after searches were carried out by the government. However, it is now said that may not be the case. The government clarified that the two Chinese directors in question, Zhengshen Ou and Zhang Jie, were part of GPICPL, a company linked to cellphone maker Vivo. And apparently the two had fled India last year.
“Zhengshen Ou and Zhang Jie are directors of GPICPL, a company associated with cellphone maker Vivo, and they fled last year,” said the ED official. ANI.
Indian government playing by the book
The Indian government, it was pointed out, regularly sends notices to these companies. It is when your answers are late or wrong that attacks are conducted to uncover the truth. While Chinese companies may play the victim, no one is really convinced of their regret. For, in this age and time, no government is going to get out of the way of needle companies, especially those that have invested in the country. Even if the equation between the Indian and Chinese governments isn’t exactly smooth, New Delhi isn’t given to rash actions involving attacking Chinese companies.
As a government official said in media reports: “The raids followed all protocols to be followed during these searches. He dismissed suggestions that linked the raids to the troubled India-China relationship. The IT department (Income Tax), as well as the Ministry of Corporate Affairs is also keeping an eye on Chinese manufacturing companies and the searches were a result of that alone.
The general feeling in the corridors of power in New Delhi is that Chinese companies should adhere to local laws and not resort to financial cheating if they don’t want a visit from the tax authorities.