The Indian smartphone market is dominated by the Chinese brands like Xiaomi, OnePlus, Oppo and Vivo. And all of them have had their run-ins with the Indian tax authorities. Previously, Xiaomi, Oppo, OnePlus, and even telecom gear maker Huawei faced the fire for alleged tax fraud in India.
Now the left-out Vivo too is facing the music.
The Indian government conducted searches at 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 firms.
The raids by the Enforcement Directorate is an extension of the general probe against Chinese firms. The searches were carried out under the provisions of Prevention of Money Laundering Act (PMLA).
Local units of Vivo Mobile Communications were under the radar as part of the investigation into other China-based firms. An inquiry against Vivo was sought in April this year to detect if there were 'significant irregularities in ownership and financial reporting'.
Chinese brands currently account for four of the top five smartphone vendors in India by shipments. At the end of the first quarter, Vivo has around 15% 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 as some typical Chinese official is quoted by the helpful State-backed media there as saying that such raids to don't help boost investor confidence in India. This time too, it's no different.
Vivo said in a statement, "as a responsible corporate, we are committed to be fully compliant with laws in India".
Meanwhile, Ding Jihua, deputy director of the Beijing New Century Academy on Transnational Corporations, was quoted as saying, "such frequent investigations targeting Chinese companies are affecting Chinese investors' confidence in the Indian market."
It all looks a tad orchestrated. For, the cases the against the Chinese companies in India are not ordinary or small ones. For instance, Xiaomi has been slapped a tax notice for Rs 653 crore (roughly $87 million) for alleged non-payment of royalty and licence fee in the value of its imports. The Directorate of Revenue Intelligence (DRI), which keeps tab on tax violations by companies, said Xiaomi India had evaded customs duty by way of undervaluation.
The raids at Huawei similarly revealed that the group had made inflated payments against receipt of technical services from its related parties outside India. The company could not justify the genuineness of obtaining of such alleged technical services. Its financial impropriety amounted to over Rs 400 crore. There was an Enforcement Directorate case against a company related to Oppo, too. Oppo's Chinese distribution partner was penalised in hundreds of crores by the ED in Hyderabad.
Have Vivo officials fled India?
Meanwhile, Indian media has been full of reports that two top directors of Vivo had fled India after the searches were conducted by the government. However, it is now said that it may not be the case. The government has clarified the two Chinese directors in question, Zhengshen Ou and Zhang Jie, were part of GPICPL, a firm connected with mobile maker Vivo. And apparently the two had fled India last year.
"Zhengshen Ou and Zhang Jie are directors of GPICPL, a firm associated with mobile maker Vivo, and they fled last year," the ED official was quoted as saying by ANI.
Indian govt playing by the book
The Indian government, it has been pointed out, regularly sends out notices to these companies. It is when their responses are tardy or wrong that the raids are conducted to ferret out the truth. Though the Chinese companies can play victim, no one is really convinced of its lament. For, in this age and time, no government will go out of the way needle corporates especially those that had invested in the country. Even though the equation between the Indian and Chinese governments is not exactly smooth, New Delhi is not given to brinkmanship that involves targeting Chinese companies.
As one government official said in media reports, "The raids adhered to all the protocols to be followed during such searches. He scotched the suggestions linking the raids to the troubled India-China relationship. The IT (Income Tax) department, as well as the Ministry of Corporate Affairs are also keeping a close eye on the Chinese manufacturing firms and searches were a result of that alone.
The general feeling in the corridors of power in New Delhi is that the Chinese firms should adhere to the local laws and not resort to financial skulduggery if they wanted no visit from the tax authorities.
