Skip to content

China Levies Heavy Corporate Back Taxes From Up to 30 Years Back

Many listed companies in China have recently received notices that they must pay back taxes from several years ago. Some back taxes date as far back as 30 years and amount to hundreds of millions or even billions of yuan. Private enterprises have gone silent after hearing this news, with some announcing that they will cease operations. Last week, seven large companies in Guangdong went bankrupt, including some that had been operating for 30 years.

A recent announcement that companies need to pay back taxes over a 30-year period has caused unease among many enterprises in China and has drawn public attention. On June 13th, VV Drink Co. announced that it had received a notice from China’s tax bureau requiring the company’s former subsidiary to pay over 85 million yuan in unpaid consumption taxes dating from 1994 to 2009. Other companies like Shanghai Shunho New Materials Technology Co., Peking University Healthcare Corp., ChinaLin Securities Co., and LianTronics followed with similar tax repayment announcements, with BoHui Chemical Technology Co. ordered to pay 500 million yuan (US$ 69 million) and consequently issuing a production halt notice.

A lawyer commented that retroactively taxing companies on the past 30 years presumes guilt and violates administrative law principles. He stated that China’s economic downturn has severely reduced government fiscal revenue, leaving tax collection as their only income source, but that pursuing more taxes will only force more private enterprises out of business and increase unemployment.

The report notes examples of companies in Guangdong being taxed retroactively for 20-25 years. A banker noted that, despite local government salary cuts, governments are still in need of more tax revenue due to strained finances. Concerns were raised that taxing private enterprises so heavily could threaten livelihoods.

Source: Radio Free Asia, June 18, 2024