China Youth Daily recently reported that the government’s income for the year 2011 was “amazingly good.” However, tax-paying companies were having a hard time managing. The report gave an example of a small-to-medium sized company in Beijing. The gross profit margin of the company was near 10%, but the VAT (Value-Added Tax) was 17%. Therefore the company was heading down the same road as “everybody else” – tax evasion. One of the typical methods was for companies with business relations to stop invoicing each. Professor Zhou Tianyong from the Central Party School concluded that 90% of the companies would have to go out of business if they didn’t do something like this. The report suggested that tax cuts seem to be on political leaders’ minds, but whether there will be any tax relief remains to be seen.
Source: Xinhua, January 11, 2012