India Fines Xiaomi $500M, Seizes $6.7B
India truly lives up to its reputation as a slaughterhouse for multinational corporations, and Xiaomi has also fallen into the trap.
In January last year, the Indian government accused Xiaomi of tax evasion and issued a staggering penalty of 560 million yuan.
Then in May, under the pretext of violating local laws, the Indian government froze 55.5 billion rupees of Xiaomi India, equivalent to 4.7 billion yuan.
Recently, it has been reported that Xiaomi's appeal to the local court has been rejected, and this sum of money has been completely confiscated by the Indian government.
Since entering the Indian market in 2014, Xiaomi has struggled for nearly 10 years and hasn't made much money in total.
This time, all of it was deducted by the Indian government at once, which is equivalent to working for nothing for 10 years. How can a single word "miserable" describe it.
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Xiaomi has worked for India for 10 years for nothing.
As a federal country, India's laws are notoriously "joking", and the main feature is randomness.
In May 2022, Indian law enforcement authorities accused Xiaomi of violating India's Foreign Exchange Regulation Act, on the grounds that Xiaomi India remitted money to the United States Qualcomm in the name of copyright fees.
Logically speaking, the money of Xiaomi India is legally and reasonably earned, and it should be spent as desired, and transferred out as desired, which should be fine, right?But from India's perspective, you say this money is for paying Qualcomm's patent fees. Has Xiaomi India signed a separate patent agreement with Qualcomm?
What? No? Well, then you have violated India's FEMA Act, which is theft of India's foreign exchange reserves, and also fabricating expenses to evade taxes. I have the right to seize the money in your account.
4.7 billion yuan was seized, and Xiaomi, of course, was not happy about it and immediately publicly stated that Xiaomi complies with local laws and regulations and there are no issues, and filed an appeal.
However, not long ago, the Indian court rejected Xiaomi's appeal and announced the transition from "freezing" to "confiscation". It is obvious that this money will not be recovered.
After nearly 10 years of operation, Xiaomi has built 7 factories in India, contributing more than 20,000 jobs.
And more importantly, Xiaomi has driven the construction of the overall Indian internet industry platform with China's strong communication technology.
But even if Xiaomi is a "meritorious minister" who has helped the Indian communication industry to expand its territory, it has also encountered a "pig killing plate".
Xiaomi's profits in India over nearly 10 years may not necessarily reach 4.7 billion, and now it is very likely to have to pay extra.
Speaking of this, some people may think, is it because of the China-India relationship issue that India is taking it out on Xiaomi?
To be honest, it's really not. The Indian government is really fair in this regard. No matter who comes, whether it's Europe, the United States, Japan, or South Korea, you also have to change your suit to shorts, making you want to cry but unable to.How Unreasonable is the "Multinational Corporation Slaughterhouse" in India?
India's Minister of State Singh once stated:
As of July 27, 2022, out of 5068 registered multinational companies in India, 1777 have chosen to "leave," and among those that are still "holding their ground," only 30% are active.
What makes India capable of becoming a "slaughterhouse" for multinational corporations, taming global companies into submission?
The answer lies in the tax laws. The "unreasonable" experience of British Vodafone in India might illustrate the magic of this country.
British Vodafone is a telecommunications giant and the largest mobile phone operator in Europe.
In 2007, Vodafone acquired CPG Investment Company owned by Li Ka-shing. Since CPG held 67% of the shares in Hutchison Whampoa India, Vodafone indirectly gained control of Hutchison Whampoa's business in India, thus entering the Indian market.
However, no one could have anticipated that the Indian tax department would come knocking, stating that although the transaction took place abroad, the assets were in India, and therefore, they must collect the transfer income tax, along with additional penalties, totaling 2.6 billion US dollars (approximately 18 billion RMB).
Not having made a profit yet, being fined 18 billion first?
How could Vodafone possibly accept such a loss? They fought the case all the way to the Supreme Court of India, enduring a full 5 years before finally winning the lawsuit.Do you think that's it?
The more outrageous things have just begun.
Seeing itself losing the lawsuit, the Indian tax department got furious. Could I let a foreign company bully me in my own home?
The Indian tax department modified the relevant content of the Income Tax Act at the speed of light, tailoring a new law for Vodafone.
The most astonishing thing is that this revised law broke the international convention of not retroactively applying laws, but specifically stipulated that it can be traced back 50 years.
That's possible, this is very Indian.
As a result, the British Vodafone was defeated by the Indian tax department with the newly modified "legal weapon", and was sentenced to pay various fines, taxes, late fees, and the interest increased from the original $2.6 billion to $5.1 billion, completely dumbfounded.
But Vodafone still refused to accept defeat and stubbornly took the lawsuit to the International Arbitration Court, preparing to overturn the case for itself.
On the other hand, the Indian tax department found a new bug:
The new Income Tax Act can be traced back 50 years, so should the "illegal" multinational companies in the past 50 years all pay fines?Everyone gets a share, no one can escape.
In an extremely short period of time, India's tax department issued a staggering penalty of $13.5 billion to 17 multinational companies from Europe and America, leaving multinational companies around the world in a daze.
How can it still be the case that the law can be played with like this?
Wouldn't that mean that in the future, if you ask me to pay taxes, you can just arbitrarily change the law and trace back 50 years, and I would have to obediently accept and pay the fine?
Fortunately, under the joint pressure of a group of multinational companies, countries such as the UK, France, Germany, and the United States have all stepped forward, causing India to cancel the legal provision of tracing back 50 years.
However, after this battle, India's reputation on the international stage has been thoroughly established, and multinational companies have chosen to withdraw from India.
Written at the end:
When India decided to open its national doors, Singapore's founding father Lee Kuan Yew had predicted that India might become the next China.
But when he realized that there were fundamental xenophobic issues in India's business environment, Lee Kuan Yew re-evaluated India:
"An open country, a closed mind."Whether it's Vodafone from the UK or Xiaomi from China, there is no fundamental difference for India; they are both "foreign enterprises."
The money earned by foreign enterprises in India has only two paths: either spend it all in India or face being "fined to the point of depletion."