Mr. Fang, who is in his early forties this year, was one of the first white-collar workers to enter foreign enterprises, and almost witnessed the whole development history of foreign capital entering China. Although Mr. Fang's current annual salary is high and his life is comfortable, his heart is always heavy in the face of this enviable job. He said with emotion: "I have helped foreign bosses earn too much money from China people, and I feel that my hands are sore after earning this money, but their hearts are getting more and more greedy. If this continues, I am afraid that China will be emptied by them! " This, which sounds alarmist, is the common aspiration of many people in the industry. Mr. Fang has worked with the boss of multinational companies for many years, and he knows the inside story of foreign-funded enterprises' false losses, tax avoidance and profit transfer in detail.
Profit transfer:
Ming xiu plank road secretly crossing Chen Cang
"A pig and a hen set up a joint venture to open a restaurant. The chicken pays for it with its own eggs and the pig pays for it with its own meat-can the joint venture continue after the pork is cut?"
Mr. Fang was a student in the Department of Economics and Management of a key university. After graduation, he was assigned to work in a state-owned enterprise with good benefits. Just after working for two years, he met a rare opportunity-a well-known multinational company in the industry came to China to discuss cooperation matters. With fluent English, Mr. Fang became the backbone of the negotiation. "At that time, the' joint venture' was just a piece of meat that could be thrown up," Mr. Fang recalled. "The competition between several domestic counterparts was extremely fierce. Now I think about it, it is a struggle between snipe and clam, which makes the fisherman benefit." Finally, while winning, Mr. Fang's unit couldn't wait to accept the proposal of foreign investors to divest superior assets and form a joint venture company.
Due to his outstanding performance in the negotiation and his trust in the future development prospects of the joint venture company, Mr. Fang finally resigned from his job in the state-owned enterprise and accepted a middle-level position in charge of procurement in the joint venture company. I thought that among the enterprises with 51%of the controlling shares held by China, the leaders should be China people. However, in practice, Mr. Fang found that because foreign capital provided "advanced management experience" and "advanced production technology", he mastered the decision-making direction of most practical problems. In particular, the foreign party controls the purchasing power of raw materials and parts in actual operation by virtue of technical control.
At first, Mr. Fang, based on the belief of doing something, carefully checked every parts supplier who submitted the intention of cooperation, and finally locked in a private enterprise in the south. The technology passed the standard and the specifications met the standards. The most important thing was the low price. After the application report was submitted to the upper-level supervisor, it was rejected on the grounds that "the factory must submit the products to the parent company for certification".
When Mr. Fang conveyed the conclusion to the bidding manufacturer and euphemistically asked the other party for certification, the other party was anxious: "The main supply direction of our spare parts products is the Sino-foreign joint ventures in the industry. In order to get the right of parts matching, we have negotiated abroad many times, which not only cost a lot of travel expenses, but also cost millions of dollars in technology transfer fees. Our products have passed the international certification to ensure the quality. Why should we submit the certification again? These expenses are all production costs! " After accounting, if the certification fee will increase the production cost by about 20%, and the bidder reluctantly agrees to carry out the certification after repeated measurement, the foreign party throws out a new reason: "the certification standard is not provided to non-supporting manufacturers." Mr. Fang suddenly realized that the foreign party simply did not agree to purchase spare parts and raw materials at home, and the fundamental purpose was to transfer profits to its foreign parent company through the so-called "original supply system". The profits of the joint venture must be shared with the Chinese side, but the huge profits brought by high-priced procurement to foreign subordinate parts manufacturers directly controlled by the parent company can be enjoyed by them alone.
"A pig and a hen set up a joint venture to open a restaurant. The chicken pays for it with its own eggs and the pig pays for it with its own meat-can the joint venture continue after the pork is cut?" The helpless Mr. Fang's work at hand is much simpler after learning the fundamental intention of the foreign party. Although the purchasing cost of spare parts has increased by nearly 60%, the good sales situation has brought good benefits to the joint venture company because it is playing the banner of "internationally famous brand". However, with the escalation of industry competition, profits are gradually leveled, and the disadvantage of high cost begins to appear. After repeated negotiations by the Chinese side, the foreign party finally agreed to "localize procurement" of parts and raw materials with low technical requirements. However, Mr. Fang still noticed in the actual procurement that in fact, the original foreign parts supplier was replaced by a "joint venture manufacturer" which was inextricably linked with its parent company.
analyse
Internationally, first-class enterprises earn money by certification, while second-rate enterprises earn money by brand. Take automobile production enterprises as an example, foreign investors deliberately set up wholly-owned parts enterprises in their own countries and set up Sino-foreign joint venture vehicle companies in China. Part of the money earned by Sino-foreign joint ventures should be distributed to the Chinese side, but the profits earned by wholly foreign-owned parts companies established by foreign investors in their own countries are entirely foreign. China spare parts enterprises must pass the "certification" of foreign headquarters to supply supporting products to Sino-foreign joint venture host enterprises and vehicle enterprises. In this way, "profit transfer" has been realized. "Certification" is just a means, and transferring profits is the essence.
Judging from the economic performance in the first half of the year announced by the National Development and Reform Commission, the profit of the automobile industry, which has been classified as one of the profiteering industries, decreased by 48.8% year-on-year. The data from China Automobile Industry Consulting and Development Company shows that in the first half of the year, China produced a total of185.170,000 cars, up about 3.28% year-on-year, and the sales volume was1843,000 cars, up10.55% year-on-year. Production and sales have increased, but profits have fallen. Not only the automobile industry, but also many industries have seen "strange things" in which the profits of foreign-funded enterprises are declining year by year. According to people familiar with the matter, it's not that the benefits of foreign companies are getting worse and worse, but that they have shifted their profits by means of "moving away".
The profit transfer of foreign-funded enterprises occurs in the procurement process, and its premise is that the foreign party adheres to the "original supply principle". In the host enterprises and automobile enterprises of Sino-foreign joint ventures, the foreign party has mastered the power to purchase raw materials and parts by virtue of technical control. In recent years, Chinese-foreign joint ventures and wholly foreign-owned enterprises have generally adhered to the "original supply principle" in purchasing raw materials and parts, excluding Chinese-funded enterprises.
Purchasing raw materials and spare parts from the parent company at a high price is another magic weapon for foreign companies to "steal the column". A Japanese auto parts company purchases raw materials from its parent company, and its purchase price is dozens of times higher than that of the same raw materials in China. Authoritative sources told reporters that foreign investors purchase raw materials and parts from the parent company at a high price, and then sell products to the parent company at a low price, thus transferring profits to the parent company, increasing the cost of Sino-foreign joint ventures and reducing the profits of Sino-foreign joint ventures.
In addition, the foreign side also collects high technology transfer fees from the Chinese side through "certification" and other means to achieve the purpose of transferring profits. The technical departments of Sino-foreign joint venture host enterprises are all controlled by foreign parties. Therefore, even in Sino-foreign joint venture host enterprises controlled by China, China has almost no right to speak on product matching issues. China spare parts enterprises that provide accessories for Sino-foreign joint venture host enterprises must be certified by the foreign parent company. In this way, "profit transfer" has been realized. "Certification" is just a means, and transferring profits is the essence.
Loss avoidance:
The paradox of foreign capital is surprising.
Multinational companies have their own lawyers' teams to study how to drill a small gap in the law into a big hole. Our legal loophole is as big as a door, and people walk past it with a sign in their hands "Reasonable tax avoidance".
With the influx of foreign-funded enterprises and the low price advantage of domestic counterparts, the growth rate of Mr. Fang's company has declined, and the annual tax payment of 200/kloc-0 has dropped from 60 million to 40 million. At this time, the foreign party proposed to the Chinese side the establishment of a wholly-owned enterprise on the grounds of "relying on foreign advanced management methods to promote the rapid development of enterprises and create more tax revenue for China". Mr. Fang, who has been promoted to the top of the company, was appointed by the foreign boss to be responsible for the coordination of this matter.
Mr. Fang told reporters with a sigh that the so-called "coordination work" was not difficult at that time. The local government heard that the wholly foreign-owned factory could create more profits and pay more taxes, and almost agreed to all the foreign requirements without hesitation, and actively provided preferential conditions for the wholly foreign-owned factory. Under the pressure of government departments, the Chinese side had to sell its shares to the foreign side at a very low price, and soon the foreign side established a wholly-owned company as it wished, and Mr. Fang also entered the new company as a company veteran.
But the only thing that didn't happen was the local government. The foreign party's "sole proprietorship" pays 30 million yuan in the first year, which is less than the joint venture before the "sole proprietorship"10 million yuan; The tax payment in the second year is 20 million yuan, which is less than the tax payment in the first year of "sole proprietorship"10 million yuan; The tax payment of foreign "sole proprietorship" in the third year is still nearly half less than that in the second year. Is the competition getting fiercer, or is the market getting worse? Mr Fang said: It is a well-known fact that the market situation in China has been getting better and better in recent years. In fact, after the "sole proprietorship", under the standardized management, the enterprise situation is getting better and better. As far as he knows, the share of product sales of this foreign-funded enterprise in the market has been steadily rising, and the excellent performance of China District has also attracted the attention of the parent company. At the end of 2004, the board of directors of the company decided to make additional investment for the third time.
In that case, why does this enterprise keep losing money on its books? Facing the reporter's question, Mr. Fang shook his head. Because of the different division of labor, he is not very clear about the situation of tax declaration. However, Mr. Fang definitely told reporters that because in many places, the amount of foreign capital introduced and the corresponding GDP growth are the main indicators of leading cadres, multinational companies like Mr. Fang's foreign companies can often bargain with local governments under the trump card of "currency votes" and get tax concessions unimaginable by ordinary domestic peers. In addition to preferential measures such as tax relief, financial return and low land price, some local leaders even intervene in the tax inspection work of the tax authorities for the growth of economic indicators in the region and for faster promotion. This is an important reason why many foreign companies dare to "invest more with more losses".
On the other hand, these multinational companies have strong tax planning power. An official of the State Administration of Taxation once revealed that most well-known multinational companies will choose internationally renowned accounting companies such as PricewaterhouseCoopers to deal with them. Their operation methods are very complicated, and they often turn around several times in foreign countries. Moreover, internal financial accounting has a very advanced software system, and some software systems are not operated at all by domestic tax workers, which is extremely difficult to supervise. In addition, the information blockade between customs, taxation and other government departments has made it more difficult to check taxes. Mr. Fang made a half-joking analogy: "Multinational companies have a team of lawyers specializing in law, and they can drill a hole as long as there is a little gap. Our current legal loopholes are almost bigger than doors, and they can go out in an upright manner. "
analyse
Statistics show that the average loss of foreign enterprises in China is 51%-55%, and the annual loss exceeds120 billion yuan. According to the statistics of the National Bureau of Statistics, the profits of foreign-invested enterprises (107.5 billion yuan) decreased by 3.5% in April this year. In this regard, officials of the State Taxation Bureau believe that two-thirds of loss-making enterprises belong to non-operating reasons and are intended to avoid taxes. It is conservatively estimated that the tax revenue of foreign-funded enterprises lost in China has reached 30 billion yuan a year.
At present, China has become the country that attracts the most foreign direct investment (FDI) in the world. However, a large number of foreign-invested enterprises flood into China every year, but there are generally many losses. Some people call this phenomenon "the paradox of foreign investment": First, multinational companies that can extend their capital operation means to other countries and decompose the creation process of value chain to other countries have higher loss rates than local enterprises in the host country. Second, capital is profit-seeking. With such a high loss rate, there are still a large number of foreign capitals pouring into these hot spots. How did such an amazing "paradox of foreign investment" come into being, and what secrets are hidden in it?
Qingdao is a key city to attract foreign investment in China. In the first half of 2004, 479 foreign-funded enterprises above designated size suffered losses, accounting for 60% of the total losses of enterprises above designated size in Qingdao. The loss was 830 million yuan, accounting for 68% of the losses of enterprises above designated size in Qingdao.
Not only in Qingdao, the Yangtze River Delta, the Pearl River Delta and the Bohai Rim region, large losses of foreign-funded enterprises are widespread. The purpose of book losses of foreign-funded enterprises is to avoid taxes. At present, there are six main forms of tax avoidance for foreign companies: buying and selling both ends, and transferring profits abroad through "AG low-paying"; Unrealistically increasing the value of fixed assets and equipment, recovering part of the investment in advance, and falsely reporting the annual depreciation expense of the enterprise, which delayed the enterprise from entering the profit-making year; Remittance of profits abroad in the form of paying royalties, sales commissions and kickbacks such as patents, proprietary technologies, trademarks and goodwill; Within the group, multi-link extraction and payment of royalties for upstream, middle and downstream products are implemented; To pay for network maintenance, advertising, consulting and other labor costs to transfer profits; Use the weakening of capital to transfer corporate profits by providing loans to pay interest or not to charge interest through the financing of affiliated enterprises.
Such large-scale tax avoidance by foreign-funded enterprises also reflects the weak supervision of foreign enterprises in China. It has been estimated that with the existing manpower, material resources and technical means in China, the average probability of each existing foreign-funded enterprise being audited is once in 800 years! Although the authenticity of the figures is worth discussing, it also illustrates the lack of anti-tax avoidance in China's tax inspection departments from one side.
invite outside investments
Local enterprises: lack of language rights in differential treatment
"China people are experts in civil wars and amateurs in foreign wars. When some officials see foreigners, they can't wait to kneel down and call them' foreigners'. Without policy support, China enterprises will never have a real right to speak in the international market."
For China people who work in foreign companies like Mr Fang, especially those who have been promoted to senior managers, their heads are always like a ceiling with a piece of glass hanging from it, and they can never get into the core. The real supervisor is always a foreigner who parachutes in, or a Chinese banana who is "yellow outside and white inside". In addition to the generous salary, these people will have quite a few home leave every year, and the high tolls for entering and leaving the country will also be fully reimbursed by the company. The psychology of "making money for foreigners in China" has been haunting Mr. Fang, but Mr. Fang, who has accumulated certain customer resources and received good management training, has never left a foreign company to start his own business, but it is because he saw the lesson of a colleague in that year.
Xiao Liu and Mr. Fang experienced the transformation of that company from Sino-foreign joint venture to wholly foreign-owned. The only difference is that Xiao Liu is a professional technician. After mastering certain resources, he chose to start his own business. At first, Xiao Liu's factory operated well. Because he went to a high-end production line with high technology content, he avoided some fierce low-end competition, and product sales soared. However, with the continuous injection of foreign capital, many foreign companies have begun to carry out large-scale and supporting production. At the tender meeting, Liu Fa Jr.' s products are always defeated by some new joint ventures. However, due to repeated certification and rising transfer costs of some core technologies, the profits of their products are constantly leveled. What is even more frightening is that in many cases, these private-owned enterprises, which are not technically superior, have to face more unequal treatment.
Take taxation as an example. Needless to say, as foreign companies can enjoy various tax benefits according to national policies, in practice, the probability of private enterprises being sampled will be dozens or even hundreds of times that of foreign companies, and many private managers will tremble when they hear the word tax. According to Xiao Liu, in a major tax inspection, because there were some fake tax invoices in the market at that time, the enterprises that received the invoices had to face the situation of paying back taxes. Due to the shortage of funds at the end of the year, Xiao Liu had to mortgage his house into cash to avoid jail. In the face of the same problem, managers of foreign companies will get more time to deal with it.
analyse
In fact, the elimination of enterprises in China is an "ongoing" rather than a "future tense", and in some industries it is even close to a "completion tense". Look at our mobile phone market. Up to now, foreign manufacturers have earned more than $ 100 billion by selling chips, while TCL, the best mobile phone manufacturer in China, only earns 600 million to 700 million yuan a year. The market share of the second generation mobile communication base stations is as high as more than 400 billion RMB, of which only 2.4% is provided by China enterprises according to the folk algorithm, and the data of the Ministry of Information Industry is 6%. There is no order of magnitude difference between these two figures. In fact, more than 400 billion have been taken away by foreign enterprises.
After China's entry into WTO, some economists put forward the concept that China will become a "world manufacturing center". At present, international manufacturing capital has moved to China on a large scale. However, among the products that have occupied the market advantage at home and abroad in China, they mainly focus on the production of non-core parts and product assembly. Therefore, China can only be regarded as a manufacturing power, not a manufacturing power.
Undeniably, there are not many enterprises in China that can own independent intellectual property rights. In the whole manufacturing industry chain, most enterprises in China are still in the downstream, and the conditions for their own growth are very fragile. Wei Xin, chairman of Founder Group, pointed out that in the past, China's practice of "exchanging market for technology" proved to be a failure. The market was taken away, but it was not exchanged for technology. Only by mastering the core technology in industrial development can domestic enterprises take the leading position in international economic competition, control the division of labor and profit distribution in the industrial chain, have greater autonomy to decide the timetable for product launch and elimination, and obtain excess profits higher than the industry average.
When a certain technology is updated, domestic enterprises will have the opportunity to own independent core technologies. When this opportunity arises, the government should make great determination to adjust industrial policies and protect local industries as much as possible. For industries in which China has made the advantage of manufacturing scale and formed the layout of supporting products, such as electronic products, domestic enterprises should not only buy foreign technologies, but also select some key technologies to make breakthroughs, so as to establish an industrial chain led by China enterprises. At the same time, the relevant state departments should make full use of the policy protection measures provided at the initial stage of China's accession to the WTO, and give appropriate support to areas that may form major breakthroughs from industrial policies, tax policies and state procurement to help these enterprises turn their manufacturing advantages into technological advantages. （ZT）
------------
The fire runs underground and rushes; Once the lava is ejected, it will burn all weeds and trees, so it will not rot.