China slapped fines of more than US$300,000 on the Ritz Carlton and Crowne Plaza hotels in Beijing, along with four other companies for using recent tax reforms to justify price increases.
The country’s top economic regulator, the National Development and Reform Commission (NDRC), posted the names of six businesses that had been fined 2 million yuan each on its website on Friday, Reuters reported.
The companies had raised prices following the May 1 rollout of a value-added tax (VAT) system in the construction, property, finance and life services, which cover the hospitality, healthcare and tourism industries.
Aside from the two hotels, the regulator also fined China World Trade Center, a subsidiary of Singapore developer Capitalan, a property management subsidiary of New World Development Company (00017.HK) in Shanghai and Shenyang, and Hang Lung Properties Ltd., a subsidiary of Hang Lung Properties Limited (00101.HK).
The fine resulted from a misunderstanding over the new tax system and the hotel adopted a new pricing policy over the weekend, said Michele Lv, a Ritz-Carlton PR manager for Asia Pacific.
China started applying VAT to some sectors in 2012, and the May rollout extended the tax to the final four industries not yet covered.
The government hopes the reforms will cut firms’ tax burdens by more than 500 billion yuan (US$77.23 billion) this year, part of a broader push for “supply-side reforms” aimed at cutting red tape and scaling back the role of government in business to allow market forces greater room to flourish.
The new system replaced a business tax, which directly taxes businesses, whereas a VAT – sometimes known as a goods and services tax – is borne by the end consumer, reducing the burden on companies which are facing rising costs and a slowing economy.
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