Seagate’s move to close factory in China adds to fears of suffocating tax regime
Decision by disk drive manufacturer reportedly comes after months long battle with local officials over whether it should pay more in levies
A decision by Seagate, the world’s biggest maker of hard disk drives, to close a factory in Suzhou in eastern China and lay off some 2,000 workers has raised questions over whether the nation’s tax regime is suffocating its economy.
Although both the local tax authority, where the plant is located, and Seagate have cited a “business reshuffle” as the reason for the closure, analysts and chamber of commerce officials said the tax system might have played a role in convincing the company to downsize its mainland operations. Seagate paid US$225 million in taxes in early 2015 and was required to pay an “additional” 400 million yuan (HK$450 million) in tax annually.
“The tax situation makes it very difficult for Seagate, who made a business decision to leave Suzhou. As far as I know, the company felt the need to undo its tax burden,” William Zarit, chairman of the American Chamber of Commerce in China, said at a briefing in Beijing last week.
Suzhou is located in Jiangsu, a province that is a magnet for foreign investment, and Seagate’s decision has caught nationwide attention amid concerns China is losing its appeal to overseas investors.
A recent survey by AmCham in China showed that one in four US businesses in China had moved operations out of the country or planned to do so, citing rising costs and protectionism.
