iPhone maker Foxconn faces tax investigation in China

Taiwan's presidential election, which Foxconn founder Terry Gou is contesting, may have inspired the probe, sources say

Foxconn founder and former chief Terry Gou campaigning in Taiwan's presidential election in August. Sources say the tax probe, and its leaking to 'Global Times', is linked to the election. Picture: Jameson Wu/AFP/Getty

Foxconn, a major supplier of Apple’s iPhones, is facing a tax probe in China, which sources say is tied to Taiwan’s upcoming elections.

China’s state-backed Global Times tabloid said some of Foxconn’s key subsidiaries in China were the subject of tax audits and that China’s natural resources department had conducted on-site investigations on land use by Foxconn enterprises in Henan and Hubei provinces and elsewhere.

The two sources said several companies which they did not name had been audited by Chinese authorities in recent months, but they believed only Foxconn’s probe was made public for political reasons. They highlighted the audits come less than three months ahead of Taiwan’s presidential election and amid Foxconn’s drive to expand production outside China.

The government of Taiwan, which China claims as its own territory, frequently accuses Beijing of seeking to exert military or economic pressure to sway the outcome of its elections to ensure an outcome favourable to China. Foxconn’s founder Terry Gou, who stepped down as company chief in 2019, is standing as an independent for president.

The Global Times said by running, Mr Gou might split the opposition vote, potentially ensuring a victory for current vice president Lai Ching-te who is already leading in the polls. Beijing detests Mr Lai, whom it believes is a separatist.

A source told Reuters that the audit of Foxconn, and the leaking of news about it, could be a warning to the firm as it considers making iPhones outside China. Stock picture

Citing unnamed experts, the Global Times said Mr Gou’s “act of running for the elections is likely to further divide the island’s opposition camp, and this will in the end favour secessionist ruling Democratic Progressive Party’s candidate Lai Ching-te”.

The audits of Foxconn have not been officially announced by any Chinese government department. Foxconn employs hundreds of thousands of people in China and is a major investor there, regularly hailed by Beijing as an example of the success of Taiwanese investors in the country.

However, the company has been pushing to diversify its manufacturing base outside China, and the first source told Reuters they viewed the audit as a “warning” to Foxconn. Foxconn’s billionaire founder Mr Gou has trailed in the polls despite running a high profile campaign for president.

He has accused Taiwan’s ruling Democratic Progressive Party of taking the island to the brink of war with China by its hostile policies and that only he, with his extensive business and personal contacts in China and the US, can maintain peace.

The Foxconn probe is now an election issue.

• Reuters