Chinese Communist Party (CCP) authorities have bolstered tax collection from listed companies that publicly traded in the Shanghai or Shenzhen exchange market, by multiple means such as backdating from 10 to 30 years or increasing consumption tax amounts by policies.
On June 13, VV Food & Beverage (600300. SH) released a statement saying its former controlling subsidiary, Hubei Zhijiang Wine Industry Group, has received notice from the local tax authority to pay back consumption taxes totaling 85,002,900 yuan (approximately $1,946,800) for the time between 1994 to 2009.
As early as January 2020, Hubei Zhijiang Wine Industry Group had been requested to pay the consumption tax and additional tax from 2015 to 2018, amounting to over 196 million yuan (about $29.87 million).
VV is a well-known soymilk brand in China with more than 30 years of experience in the food industry.
So far this year, in addition to VV, four other listed companies in the A-share market —Shanghai Shunho New Materials Technology (002565. SZ), PKU Healthcare (000788. SZ), ChinaLin Securities (002945. SZ), and Shenzhen Liantronics (300269. SZ)—have been requested to pay taxes in arrears in tens of millions of yuan, respectively.
Between 2021 and 2023, at least nine listed companies have issued notices they need to pay back taxes required by the revenue authorities.
Analysts believe the CCP’s revenue-raising tactic will adversely affect those enterprises and eventually worsen economic decline.
Hu Liren, a Chinese entrepreneur who currently resides in the United States, said, “Such ‘tax backtracking’ is just an excuse of the CCP, its actual intent is to get them [listed companies] to turn in their assets and take their property away.”
Moreover, in Mr. Hu’s view, many acts of tax evasion have even been undertaken with the support of local governments.
CCP’s Tax Policy Adjustment
In addition to tax payments dating back decades, the CCP financial and tax authority has adjusted certain policies regarding excise taxes, leaving industrial enterprises facing huge penalties.On June 13, NingBo BoHui Chemical Technology Co. Ltd (300839 . SZ) announced that due to difficulties in operating funds, the company had shut down the production of aromatic hydrocarbon oil the day before.
According to the company’s previous statement, it was notified by the local tax authorities early this year that one of its products—derivatives of heavy aromatic hydrocarbons—was required to pay excise duty based on “heavy aromatic hydrocarbons” as defined in a new policy that issued on June 30, 2023, by the Ministry of Finance and the General Administration of Taxation on “the Caliber of Implementation of Consumption Tax Policies on Certain Refined Products Oil.”
This new rule makes it “fatal for the company to pay nearly half a billion dollars (about $70.27 million) in back taxes before shutting down production,” an executive of NingBo BoHui Chemical Technology told Chinese financial media on June 14.
China’s public trading market and listed firms have been in distress due to the economic downturn, said Mr. Hu, “Under these circumstances, if the communist government continues to charge taxes on the already struggling enterprises by various means, these enterprises will face total collapse.”
Mr. Lai held a similar opinion, adding, that CCP’s tightening of tax regulations will lead to “significant losses to the market economy, especially to small and medium-sized enterprises, and ultimately further exacerbated the economic crisis in the country.”
