**Apple’s Tax Advocacy in India: An Obstacle to iPhone Production Growth**
Apple is actively pursuing modifications in India’s tax legislation as it confronts potential liabilities that could reach billions regarding the assembly of iPhones. Presently, approximately 25% of iPhones are produced in India, and Apple intends to enhance this ratio. Nonetheless, the company faces considerable obstacles in augmenting its manufacturing capabilities.
### iPhone Production Machinery
The production of iPhones necessitates specialized and costly machinery. While Apple’s manufacturing allies, like Foxconn and Tata, usually shoulder the expense of acquiring this equipment, the financial strain can become burdensome when production volumes need substantial increases. In China, Apple has implemented a strategy of acquiring the equipment directly, which is then set up in the facilities of its manufacturing partners. This approach enables Apple to maintain ownership of the machinery.
However, mimicking this strategy in India presents a significant challenge due to the nation’s tax regulations.
### Apple Confronts Billions in Tax Obligations
In China, Apple’s ownership of production equipment does not generate tax implications. In contrast, in India, the circumstances are considerably different. Reports suggest that according to the Income Tax Act in India, Apple’s ownership of assembly equipment could be regarded as a “business connection.” This classification might make Apple’s iPhone profits liable for taxation in India.
Industry professionals, including Riaz Thingna from Grant Thornton Bharat LLP, suggest that if Apple’s operations are classified as a business connection, the global revenue of the company could be utilized to ascertain the income apportioned to India. This situation could leave Apple facing substantial tax obligations.
Essentially, earnings derived from iPhones produced with Apple-owned machinery would be subjected to taxation in India, creating a financial barrier for the corporation.
### The Quandary for the Indian Government
The Indian government faces a difficult situation. It aims to attract foreign investment to enhance its manufacturing sector while also ensuring it obtains a fair portion of tax revenue from businesses operating within its territory. The necessity for a balanced strategy is critical, as both Apple and the Indian government need a mutually advantageous agreement for the expansion to be successful.
### Conclusion
As Apple maneuvers through the intricacies of broadening its iPhone assembly operations in India, the success of its lobbying endeavors will be pivotal. A resolution that accommodates both Apple’s requirement for operational agility and the Indian government’s revenue objectives seems to be the most promising way forward.
