Date
16 December 2017
China's fresh crackdown on tax avoidance by foreign companies follows a US$140 million levy on Microsoft last week for back taxes. Photo: Bloomberg
China's fresh crackdown on tax avoidance by foreign companies follows a US$140 million levy on Microsoft last week for back taxes. Photo: Bloomberg

Beijing cracks down on foreign tax cheats

China is cracking down on tax avoidance by foreign firms to prevent taxes being diverted overseas.

Beijing will closely monitor foreign companies to ensure profits are not shifted to countries or regions with lower tax rates, Reuters reported Tuesday.

The move comes after tax authorities slapped Microsoft Corp. with US$140 million in back taxes last week.

A series of investigations by antitrust regulators has prompted concern multinational companies are being singled out by Beijing.

Last week, state news agency Xinhua hinted that a United States company owed the Chinese government 840 million yuan (US$137 million) in back taxes and interest, as well as more than 100 million yuan in additional taxes a year in the future.

The report said the firm is one of the world’s 500 biggest firms and had established a wholly owned foreign subsidiary in Beijing in 1995.

Microsoft, which did not deny its involvement, is the only company that fits that description.

“China will coordinate with other countries to clamp down on cross-border tax avoidance,” Zhang Zhiyong, deputy director of the State Administration of Taxation, told Xinhua.

At the G20 summit in Australia last month, Chinese President Xi Jinping and other leaders pledged to increase efforts to prevent tax avoidance. 

China is the largest country for foreign direct investment but this fell for the fourth straight period on a cumulative basis in October, underscoring investor caution as the world’s second largest economy cools.

– Contact us at [email protected]

FL/RA

EJI Weekly Newsletter

Please click here to unsubscribe