Recently, the news of “companies being retroactively inspected for the past thirty years” has sparked widespread attention and concern. The origin of the issue lies in several Chinese listed companies revealing that local governments are demanding them to pay taxes dating back to the 1990s. For example, WeWei Food was investigated by the Chinese authorities for tax issues related to its former subsidiary Zhijiang Liquor Industry dating back 30 years, and was required to pay over 85 million yuan in back taxes. Additionally, companies like Shunhao Group, Beida Pharmaceutical, Cangge Mining, Hualin Securities, and Lianjian Optoelectronics have also issued notices to pay back taxes.
This sudden demand for back taxes has left many already struggling companies feeling even more disheartened, with some even announcing “lying flat”–giving up on trying to grow the business. Bohui Group announced a production halt on June 13, reportedly due to being notified by the tax bureau to pay nearly 500 million yuan in back taxes.
Facing the anxiety and unease of these companies, the Chinese State Administration of Taxation came out on the 18th to dispel rumors, stating, “There has not been a nationwide or industry-wide tax inspection activity initiated, nor is there intent to review tax evasion by enterprises from two to three decades ago.” They clarified that recent tax-related issues raised were routine procedures for collecting past due taxes or providing notifications about applying tax policies in accordance with the law.
Such a statement of “routine enforcement according to the law” implies that these companies are being penalized for their own actions, and the tax authorities are just following the legal requirements set by the Chinese Communist regime.
However, including tax officials, the Chinese Communist Party (CCP) officials are well aware that almost all companies in mainland China engage in tax evasion, as the burden of corporate taxes far exceeds that of developed Western countries. In a report released in July 2013 by the Economic Construction Department of the CCP’s Ministry of Finance, it was mentioned that the tax burden on enterprises was around 40% after taking into account various taxes and fees, surpassing the average level of OECD countries.
This description aligns with a recent calculation of China’s heavy tax burden since 2009, which has exceeded 35%, approaching the average level of developed countries like the OECD.
Economist Lang Xianping revealed during a speech in Shenyang on October 22, 2011, that based on actual data, in 2011, corporate taxes paid in mainland China, including direct and indirect taxes, accounted for 70% of pre-tax profits, while the taxes collected from Chinese taxpayers by the CCP in 2011, including direct and indirect taxes like VAT, consumption tax, amounted to an average of 51.6% of income. He believed these figures to be the highest globally in history. No country dares to impose such high taxes, nor has any dynasty in China’s five-thousand-year history dared to impose such heavy taxes.
It is precisely due to such a heavy tax burden that mainland Chinese companies seek ways to reduce their tax payments. Zhou Tianyong, Deputy Director of the International Strategy Research Institute of the CCP Central Party School, once said that without tax evasion, about 90% of companies in China might face closure.
Given the potential consequences, the CCP turns a blind eye during economic upturns. However, with China’s economy sharply declining in recent years, particularly due to the real estate industry slump and lack of confidence among citizens leading to reduced investment, local CCP finances are facing significant deficits. To bridge these financial gaps in the future, local governments are resorting to various means of seeking additional revenue, such as scrutinizing past records of companies to exploit loopholes for rapid income growth.
Some netizens question, “The key question is, when retroactively inspecting 30 years, which standards and laws are being used? How many times have tax laws and regulations changed in 30 years? What was legal and compliant in the past may no longer be so due to frequent changes. Are they using current illegality to investigate past legality?”
Such reasoning may be sound, but the shameless CCP regime does not care, almost to the extent of saying, “I am short of money, so I need to grab money.” This sheep shearing by the CCP is nothing but exploitation. Logically, if the CCP wants to expedite economic recovery and avert an economic collapse, the government should significantly reduce taxes, lessen the burden on enterprises, and help companies overcome current challenges. However, the CCP’s actions will only drain vitality and drive from private enterprises that have survived the pandemic and struggles, ultimately leading to closures. As everyone has a history of something unspeakable, this will result in an increase in unemployment rates. With more people unemployed, consumption will plummet, domestic demand will stagnate, companies will face greater difficulties, and CCP revenues will continue to decline. It’s a deadlock the CCP cannot solve until a complete collapse.
With the understanding of such consequences, the CCP tax authorities continue to deny the existence of a “30-year retrospective audit.” But who would believe them?
The emergence of “Tax and Police Joint Operation Centers” in various provinces and cities like Shanxi, Yunnan, Hainan, and Shijiazhuang evokes a chilling atmosphere. Isn’t this a slap in the face of the tax bureau? Is “looking back thirty years” truly just a “rumor”? Moreover, whom are the police and tax authorities teaming up to battle with? Companies? Citizens? Who then, is the enemy? What’s the strategy behind this? As public servants serving the citizens, what gives them the authority to act in such a manner? Who has granted them such power?
Yes, it is the CCP that has bestowed upon them this authority. In a country under a one-party dictatorship like the CCP, citizens are nothing; all government departments and officials, funded by taxpayers, are only loyal to power, loyal to the CCP. As for the CCP’s rhetoric about “safeguarding private enterprises, supporting small and medium-sized enterprises, boosting their confidence, and allowing entrepreneurs to pursue their ventures peacefully,” let’s just listen. However, the fearless appearance of many “Tax and Police Joint Operation Centers” across the country suggests that the CCP’s exploitation will continue, further augmented by a violent intimidation aspect. For companies and individuals who don’t want to be exploited, what can they do? “Lying flat” might be an option worth considering.