Recent tax-related announcements by Chinese companies have caused anxiety among private businesses in China. Two notable cases involve Weiwei Co., Ltd. being ordered to pay 85 million yuan in back taxes dating back to 1994, and Ningbo Bouquet Chemical facing a 500 million yuan tax bill affecting its profits.
These incidents, along with similar cases involving other companies and the establishment of “police-tax joint operation centers” in over 20 provinces, have led to concerns about aggressive tax collection practices. Rumors spread online about the government conducting “30-year retroactive tax inspections.”
The State Taxation Administration quickly denied organizing any large-scale or industry-wide tax inspections, stating that recent cases were part of routine tax collection efforts.
The government’s actions come amid financial challenges, with tax revenues decreasing by 4.9% in the first four months of 2023, while public expenditures increased by 3.5%. A significant factor is the decline in land sale revenues, which many local governments heavily rely on.
These developments have worried private businesses, particularly those focused on the domestic market with thin profit margins. Some fear that retroactive tax inspections could potentially bankrupt companies, especially if they include penalties for late payments.
While tax regulations typically allow for 3-5 year retroactive inspections, there are exceptions for cases involving tax evasion or fraud.
Source: BBC Chinese, June 24, 2024
https://www.bbc.com/zhongwen/simp/chinese-news-69137259