Authorities in cash-strapped Chinese cities are chasing companies for taxes dating back years, and in some cases decades, as they try to plug a hole blown in their finances by the real estate crisis.
At least eight major listed companies in China have disclosed that they’ve received demands to pay historical taxes, in one case going as far back as the 1990s, in a development that has caused an uproar online and damaged already fragile business confidence. V V Food & Beverage, the country’s largest soy milk producer, said last week that one of its subsidiaries had received a demand for payment totaling 85 million yuan from the government of Zhijiang city in the central province of Hubei.
Investigating possible back taxes from 20 or 30 years ago seems “extreme,” said Frank Tian Xie, a professor at the University of South Carolina Aiken. “If those companies indeed owed taxes before, why didn’t the authority go after them right away? … Why isn’t it the government’s negligence in tax collection that resulted in this fiasco?” he said. The resulting payments, including the unpaid tax, fines and interest could be “exorbitant” and lead to bankruptcies of many companies, he warned.
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