Media reports on the opening of a series of joint task forces between police and tax authorities have sent ripples across Chinese businesses, with lawyers saying such operations could send the wrong signal to the public amid weak confidence over China’s economic outlook.
A “combat” operations centre opened last month in Changzhi in central China’s Shanxi province, pledging to “safeguard national tax security”.
Last week, the State Taxation Administration also had to deny that it would launch a national investigation after several listed firms said they had been asked to pay decades-old overdue taxes.
The move was seen by analysts as part of efforts to squash speculation that some regions might be looking to punish companies for overdue tax or misconduct amid mounting fiscal stress.
“Of course, it is reasonable that some entrepreneurs might be concerned,” Beijing-based lawyer Zhu Bao said.
“Largely because there are problems with the economy now and some might have experienced difficulties. So they are more sensitive to these [reports].”
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What does it mean for the world when Chinese consumers tighten their belts?
What does it mean for the world when Chinese consumers tighten their belts?
Similar joint operations between police and tax authorities began 10 years ago in a bid to share information and coordinate tax-related matters, he added.
However, some of the latest operations have raised eyebrows in Chinese media as confidence over China’s economic outlook is relatively weak among businesses.
“[The operation will] deepen and expand tax coordination, realise the precise and integrated crackdown on tax-related crimes, down the chain, better serve the real economy, and effectively safeguard fairness and justice, so as to promote the high-quality economic and social development of Changzhi city,” said a front-page article in the Shangdang Evening News, a publication owned by the city government, last month.
China’s economic recovery has been highly uneven, and the central government has pledged greater fiscal stimulus, as well as help for entrepreneurs and small companies, but public concern remains over local government finances.
Fiscal revenues fell by 2.8 per cent in the first five months of 2024 from a year earlier, accelerating from a 2.7 per cent decline in the January-April period, the Ministry of Finance said on Monday.
There is something wrong with this concept in law enforcement
Revenue from land sales, a key source of income for many local governments, also plunged by 14 per cent in the first five months of the year compared to the same period last year.
According to the city government of Xiamen in the southeastern Fujian province, since a joint force between the police and the tax authorities was set up in 2022, the two sides had exchanged and analysed 78 batches of suspicious tax-related data and had worked together to investigate 751 cases of tax evasion and fraud.
The joint force had also recovered 2.585 billion yuan (US$356 million) in taxes, eliminated 48 illegal and criminal gangs, and taken compulsory measures against 270 suspects, according to an article in China Tax News on June 7, citing data from the Xiamen government.
But Wang Cailiang, a Beijing-based lawyer, believed local authorities publicising their integrated “combat” operations may add unnecessary fears among taxpayers.
“This problem is not just a matter of the names [of these operations], but that some civil servants may regard taxpayers as targets of warfare, and there is something wrong with this concept in law enforcement,” Wang said in a blog post last week on his WeChat social media account.
He added that regional authorities should consider collaborating with the public, rather than treating them as “enemies”, when the economy is weak.
