In recent times, tax authorities in various parts of China have sent self-inspection notices to low-income practitioners such as e-commerce operators, food delivery businesses, ride-hailing drivers, and short video broadcasters, demanding back payment of taxes. Against the backdrop of economic downturn and local fiscal pressure, this widespread and unprecedented tax audit has plunged a significant number of small and micro business owners and individual operators into survival difficulties, with some business owners even stating they would rather flee than pay the taxes they cannot afford.
On October 29th, a viral video circulating online showed e-commerce operators nationwide receiving self-inspection texts from the tax authorities. One broadcaster said, “There isn’t much time left for domestic e-commerce bosses. This round of tax inspections will likely wipe out a big portion. Today, virtually all e-commerce bosses in the country have received this text message, requiring a tax self-inspection.”
He believed that combined with the just-concluded “14th Five-Year Plan” and signals from the Fourth Plenary Session of the Twentieth Central Committee, “the golden age of the domestic e-commerce industry is indeed coming to an end.”
In this video, specific cases further revealed the severity of tax pressure. A Pinduoduo merchant revealed that their monthly revenue reached 10 million RMB, with a profit of only 200,000 RMB, but based on a 13% tax rate, they would need to pay 1.3 million RMB in taxes, far exceeding their actual profit.
Short video broadcasters and ride-hailing drivers were not exempt either. Starting from October 1st, Douyin began withholding taxes from individual broadcasters’ withdrawals, and portions exceeding 6,000 RMB per month are subject to taxation; ride-hailing drivers earning more than 8,000 RMB per month are also required to pay taxes. An example of a broadcaster showed that withdrawing 100,000 RMB would require over 6,000 RMB in taxes, and withdrawing 200,000 RMB would need nearly 20,000 RMB in taxes.
Several merchants in the video reflected that there is a significant gap between the data pushed to the tax authorities by the platforms and the actual amounts received. However, they could not obtain a clear explanation. When merchants called platform customer service to inquire about the calculation standards for the pushed amounts, the customer service said, “It’s not based on actual receipts from merchants, nor is it based on the original prices of the goods, let alone based on what the customers actually paid for,” with the specific algorithm remaining unclear.
A e-commerce business owner was asked to self-audit their accounts from 2022 to 2024, with a total sales revenue of 200 million RMB. In the absence of sufficient input invoices, they would need to pay over 13.8 million RMB in value-added tax, 830,000 RMB in additional tax, and 2.5 million RMB in income tax, totaling over 17 million RMB, with an overall tax burden of 10%. Moreover, the entity engaged in low-price general merchandise sales, with a profit margin of less than 3%, and due to cost control measures, most express and supply chain services could not obtain invoices.
Tax bureaus in various places have been flooded with e-commerce sellers seeking advice recently. Many merchants were unaware of the seriousness of the problem before receiving the texts. Some called the tax bureaus to inquire about countermeasures, but the tax authorities could not provide clear guidance either.
Faced with high tax payments, some business owners expressed feelings of despair. One business owner in the video said, “All employees are on strike, and the company is dissolved”; while another lamented, “Why are so many people around me unable to pay salaries,” including employees of enterprises, and coal miners who have not been paid for several months.
Wang Lianxiang, chairman of Changzhou Bokun Glass Technology Co., Ltd., who was once worth over 100 million, said that despite having external receivables that could cover debts, the inability to recover funds led to bankruptcy and being surrounded by numerous creditors.
Furthermore, some business owners posed a “soul-searching” question to tax consultants: “If I can’t afford to pay the taxes, will I go to jail? If so, I might as well flee first.” This reflects the extreme mentality of some small and micro business owners under high tax pressure.
A Shanghai shop owner mentioned that storefronts on main streets have been vacant for months. Although many inquire, when it comes to discussing prices, they retract, suspecting that “the bosses doing big business have all left Shanghai.”
With the full implementation of the “Golden Tax Phase IV” system, tax supervision has entered the era of precise data. The scrutiny of individual income tax has significantly intensified, shifting the regulatory focus from corporate accounts to personal income.
Following the operation of the “Golden Tax Phase IV” system, personal income tax information has been linked and shared with social security, provident funds, bank transactions, labor records, and other data. Tax authorities utilize algorithmic models to automatically identify multiple income sources, abnormal expense claims, and false special deductions, forming a multidimensional supervisory pattern of “individual and corporate scrutiny.”
Tax systems in various regions have issued reminders that starting from 2025, annual personal income tax calculations will be a focal point of scrutiny. Key targets include individuals who receive salaries from two or more units simultaneously, those with both individual businesses and employee statuses, individuals who falsely report deductions for children’s education or housing loans, as well as individuals who hold consultancy positions in multiple companies or receive project fees.
Xie Tian, an Economics Professor at the Aiken School of Business, University of South Carolina, previously wrote in the Epoch Times, “The implementation of the ‘Golden Tax Phase IV’ is touted as entering the era of ‘tax governance by numbers’, but it is actually heralding the death of private enterprises in China and signifying the demise of China’s private businesses. From the beginning of the ‘Golden Tax Phase I’ and II, many careful observers have already realized that this is a big net woven by the Communist Party, and it keeps expanding with smaller mesh size. In the past, the net only caught big fish, but now even small fry are not spared.”
“Finally, as we await the reality of the ‘Golden Tax Phase V,’ even microorganisms in China’s financial and tax pond cannot escape, making it the epitome of control over society and finance. Every penny of the Chinese people will be directly under the watchful eyes of the Communist Party, giving them absolute power over requisition and demand. With the implementation of ‘Golden Tax Phase IV’ as a powerful tool for the CCP to extract money, it also, from another perspective, confirms the deteriorating state of the Chinese economy and the impending demise of the CCP.”