Tag: Tax Evasion

  • 80% of Online-Only Smartphone Sales in India Go to Grey Market

    80% of Online-Only Smartphone Sales in India Go to Grey Market

    A recent report by The Economic Times highlights a worrying trend in India’s online smartphone market: a large percentage of phones sold online are ending up in the grey market. Trade bodies claim that up to 80% of online-exclusive smartphones are being diverted by aggregators who exploit loopholes to purchase them in bulk and resell them at higher prices.

    Tax Losses and Counterfeit Risks: The Dark Side of India’s Online Smartphone Market

    These aggregators act as wholesalers, using numerous user accounts to circumvent online retailers’ purchase limits and acquire popular models in bulk. This creates artificial stock shortages on e-commerce platforms, frustrating genuine customers. The aggregators then sell these phones to retailers across states at inflated prices, who can further exploit the limited online availability to justify even higher markups.

    This diversion results in a dual negative impact. Firstly, it causes government revenue loss due to tax evasion. Aggregators often buy these phones using business accounts, allowing them to claim Input Tax Credit (ITC) on the 18% GST paid. However, when they resell these phones at a higher price through unofficial channels, the additional profit escapes GST taxation. Industry estimates suggest this could be a potential $600 million GST rebate fraud.

    Consumer Vulnerability and Brand Impact

    Secondly, consumers are left at risk. By purchasing from unauthorized sellers, they risk receiving counterfeit products or facing warranty issues later on. Additionally, they miss out on exclusive deals and offers often available through authorized online retailers.

    Smartphone brands like Poco, OnePlus, iQOO, and Realme are reportedly the most affected by this grey market activity. These brands are taking measures to curb the practice by issuing warnings to retailers and requiring them to sign undertakings promising to sell only through authorized channels. Moreover, some brands are appointing distributors to cater specifically to offline retailers.

    Need for a Multi-Pronged Approach

    The smartphone industry requires a multi-faceted approach to tackle this issue. E-commerce platforms need to enhance their systems to detect and prevent bulk purchases using multiple accounts. Additionally, stricter regulations and enforcement are necessary to deter tax evasion practices by aggregators. Finally, consumer awareness campaigns are essential to educate buyers about the risks associated with purchasing from unauthorized sellers.

    This is an ongoing story, and it remains to be seen how effectively these measures can reduce grey market activity in India’s online smartphone market.

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  • Transsion Holdings, Parent of Tecno & Infinix, Probed for $3B Tax Evasion

    Transsion Holdings, Parent of Tecno & Infinix, Probed for $3B Tax Evasion

    Transsion Holdings, the parent company of Tecno and Infinix, is reportedly being investigated in Kenya for potential tax evasion. Known for its strong market presence, Tecno is among the leading phone brands in the country. The investigation involves tax discrepancies amounting to 400 billion Kenyan Shillings ($3.02 billion).

    Special Investigation Team

    The Kenyan Revenue Authority (KRA) has stated that the Chinese-based smartphone manufacturer, responsible for Tecno and Infinix, is under scrutiny for multi-billion Shillings tax evasion. KRA’s Commissioner General, Humphrey Wattanga, has formed a special team of skilled investigators to thoroughly probe multiple whistleblower claims against Transsion Holdings. These allegations, which have been circulating on Kenyan social media platforms for the past few weeks, suggest that the company might be involved in significant tax fraud. There is growing pressure on the KRA chief executive to take immediate action regarding the alleged tax evasion.

    Emergency Meeting and Raids

    The KRA management reportedly held an urgent meeting with top intelligence officials as the probe commenced. There have also been claims that the Commissioner General might be linked to the tax evasion case. The investigation will extensively review Transsion Holdings’ financial records over the past five years since it began operations in China. Three senior KRA officials led a raid on the company’s headquarters in Nairobi, which is believed to be the center of the alleged fraud. One of the accusations includes handling large sums of cash daily without proper wire and paper transfers.

    Market Implications and Additional Allegations

    Transsion Holdings is a significant player in the Kenyan market, generating substantial annual revenue. However, it is not listed among the top taxpayers in the country, raising suspicions of potential under-reporting. Although the company makes billions in the market, it apparently does not make the required tax returns corresponding to its revenue. Besides massive tax evasion, Transsion is also accused of smuggling undocumented Chinese workers and committing other severe labor abuses in Kenya. Market Dimensions Limited, a human resources firm providing services for Transsion in Kenya, is also alleged to be involved in the tax evasion scheme.

    The tax investigation into Transsion is anticipated to enhance the KRA’s tax collection efforts, which have seen the highest shortfall in employee tax collections despite new measures being implemented.

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