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China fights tax evasion by the rich
( 2002-07-30 10:49 ) (8 )

Chinese film actress Liu Xiaoqing, once a "billionaire", was recently arrested on charges of dodging taxes -- another example of the problem of tax evasion by the rich.

According to comments in the domestic media, China has made big strides forward in rectifying the market economic order by prosecuting celebrities for tax evasion.

Tax avoidance has become one of the social "cancers" of China. Though a group of well-known enterprises, including the Legend Computer Group and the Bank of China, were recently cited as examples of upfront taxpayers, there were at least 200,000 enterprises in Beijing whose employees paid no individual income tax last year, an official from the municipal taxation department has disclosed.

The evasion of enormous amounts of personal income tax has done great harm to the country's economy. China has always tried to create a sound social environment which honors the honest payment of taxes and has set up new management systems for levying taxes.

Beijing Municipality, and Zhejiang and Guangdong provinces, famous as "cradles of the wealthy", have all improved their management of the collection of individual income taxes.

Beijing municipal taxation bureau will begin to monitor individuals with annual salaries exceeding 100,000 yuan (US$12,000) in over 300,000 enterprises from October this year.

In addition, the 100 highest-paid people in each district or county will be listed as the key individuals under supervision, including many film or TV stars, CEOs of high-tech companies and bosses of private enterprises.

Targeting high-earning self-employed and private business owners, Zhejiang taxation department is planning to cooperate with local sectors of business administration, public security, banking and traffic control, in a bid to prevent tax dodging by the rich by closely scrutinizing their personal assets.

Last year, Zhejiang conducted spot-checks on over 23,000 private enterprises, retrieving individual income tax of 950 million yuan (US$115 million).

Tax evasion by the wealthy has evoked intense discussion in private business circles in Wenzhou City of Zhejiang.

Nan Cunhui, board chairman of Zhengtai Group, demanded a detailed accounting of his company's tax payments in the last two years and encouraged senior managers and shareholders to be aware of regulations concerning the levy of personal income tax.

Wang Jianyi, board chairman of Hangzhou Futong Group in the provincial capital, said, "An enterprise should shoulder social responsibilities actively for its long-term development."

Wang has persisted in paying individual income tax in line with the state's standards since establishing his company. Among the 120 million yuan of taxes paid by Futong in 2001, about 6.5 million yuan was in personal income tax.

South China's Guangdong Province is setting up a sound tax monitoring system based on computer networks with a total investment of 500 million yuan (US$60.5 million). Special files will be kept on high-paid individuals engaged in financing, aviation, entertainment as well as senior business managers. The provincial capital Guangzhou has also included more than 7,000 wealthy people in the primary monitoring list.

Statistics from the State Administration of Taxation show that individual income tax revenue approached 99.6 billion yuan (US$12 billion) and was China's fourth largest category of tax last year. However, personal income tax only accounted for 6.6 percent of the whole tax revenue, far less than that of many countries with a lower income level.

Experts believe that the newly-launched taxation measures as well as continuously improved laws and regulations concerning tax levying will gradually overcome the widespread evasion of personal income tax. More and more attention will be paid to this tax category as it stands for basic personal credibility in economic activities.