Source: GT Published: 2024-06-18

A number of Chinese companies being asked to pay overdue tax in the past years indicate that the authorities are strengthening taxation enforcement, but the move is not of a sweeping investigation campaign targeting publicly listed companies, Chinese experts said on Tuesday.

A-share listed companies have recently reported that they were asked to pay overdue tax, and the volume and period of the retrospective investigation have aroused heated discussion.

East China's Jiangsu-based Vv Food and Beverage Co said in a filing with the Shanghai Stock Exchange on June 13 that Zhijiang Liquor Trade Co Ltd, a former subsidiary of the company, has received a notification from local taxation bureau of the State Taxation Administration to pay overdue tax worth more than 85 million yuan ($11.72 million), citing that the subsidiary had failed to pay the declared sale taxes between January 1, 1994 and October 31, 2009.

In addition to Vv Food and Beverage Co Ltd, other companies such as Ningbo Bohui Chemical Technology Co Ltd and PKU HealthCare Co Ltd also issued announcements relating to overdue tax payments, with reasons including a change in taxation policy, failure to declare tax in line with the laws and regulations, domestic news site thepaper.com reported.

For example, PKU HealthCare Co said in April that, following an internal review, the company found it had outstanding payments including for value-added tax, corporate income tax and overdue fine worth 19.45 million yuan between January 1, 2019 and May 31, 2023.

The new policy reflects strengthened taxation enforcement in the country, as some companies may have evaded taxation due to equity transfer or a change in policy, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, told the Global Times on Tuesday.

The authorities will not launch a national campaign to investigate all publically listed companies' taxation over the past 30 years, as the central government is committed to building a sound business environment for enterprises, Dong said.

A State Council Executive Meeting held on April 26 urged for enhanced efforts to foster a first-class business environment that is market-oriented, law-based and internationalized to ensure that fruitful results are achieved.

Improving domestic business environment is an important step to boost social confidence, stimulate market vitality, and enhance development potential, the meeting noted.

While several companies said their revenues will be impacted by the new policy of overdue tax payment, most A-share companies have reported stable operations amid overall steady economic recovery.

By Tuesday, a number of listed companies have announced preliminary half-year financial results. Zibo Qixiang Tengda Chemical Co said that the company's profit is expected to fall by between 130 million yuan and 150 million yuan in the first half of 2024, an increase of 536.03-633.88 percent on a yearly basis.