Hon Hai faces tax probe by US IRS

Hon Hai Precision Industry Co (鴻海精密), the nation's biggest company by sales, said it's under investigation by the US Internal Revenue Service regarding employees' taxes on stocks received as bonuses.

The company, which makes PlayStation 2 video-game consoles for Sony Inc and personal computers for Dell Computer Corp, said in a statement to the Taiwan Stock Exchange that the tax investigation started on Tuesday.

The company did not provide details of employees or offices involved.

Hon Hai spokesman Edmund Ding (丁祈安) didn't immediately return calls seeking comment.

"This will be negative for the stock," said Paul Tsai, who helps manage the equivalent of US$3.2 billion for International Investment Trust Co (國際投信). According to Tsai, he sold his stake in Hon Hai last month.

"The information on this is still insufficient," he said.

The investigation may involve differences in laws on how stock bonuses are valued in Taiwan and the US, Tsai said.

Hon Hai chairman Terry Kuo (郭台銘), who was in Mexico at the time, canceled plans to visit a company office in Houston, Texas after the investigation started, the local edition of the Apple Daily reported today, citing an unidentified company official.

US tax officials closed Hon Hai offices in Houston, Chicago and unidentified locations in California for a one-day investigation.

That investigation will include probes of files on company computers, among other things, the report said.

Hon Hai, which operates under the name Foxconn Holdings Ltd in the US, has factories in Los Angeles, Houston and Kansas City, according to its Web site.

The company, which had sales of NT$257.8 billion (US$7.4 billion) last year, said May sales rose 0.5 percent from a year ago to NT$18.5 billion (US$533.7 million).

Sales were NT$18.4 billion in May a year ago and NT$20.5 billion in April, said the company, which also has operations in China, Ireland and the UK.