China to Focus on Tax Evasion by the Wealthy

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Last updated at: (Beijing Time) Friday, August 23, 2002

China to Focus on Tax Evasion by the Wealthy

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China is to intensify its taxation management of high-income groups and regards it as a priority in personal income taxation reform, a chief official of the State Administration of Taxation (SAT) said in Beijing on Thursday.

SAT had included nine sectors with high salaries and nine groups of highly paid people in its taxation monitoring priorities and had taken relevant steps including building an effective taxpayers' information monitoring system, the official said.

He confirmed that tax evasion by a number of highly-paid citizens existed in China but noted reinforced taxation on such groups would not affect the healthy progress of the private economy.

But the effect and strength of management on personal income taxation were limited and could not thoroughly solve the problem of unreasonable income allocation, the official said.

National campaign

China is to wage a national campaign to curb rampant evasion of personal income taxes. Taxation offices around the country will track the incomes of rich people, scrutiny tax returns of advertising professionals and entertainers, develop a computerized network of tax payments and severely punish offenders.

According to SAT, the country will set up a nationwide monitoring system of information on all high-income earners. The taxation network will be linked to data networks of other government departments to better track the activities of rich people.

A SAT official said the current personal income taxation system had some major problems, including poor monitoring of taxpayer information, inadequate taxation for high-income people and rampant tax evasion.

Personal income tax grows fast

Personal income tax has become the fastest growing source of tax revenue for the Chinese government.

The SAT attributed the rapid increase in personal income taxes to economic growth, rises in incomes, improved tax collection and newly imposed taxes on interest from savings deposits.

A SAT official said China had kept improving personal income taxation and widening its role in taxing high-income earners since adopting such taxes 23 years ago.

SAT statistics showed that since China reformed its taxation system in 1994, the revenue from personal income tax had jumped from 4.68 billion yuan in 1993 (566 million US dollars) to 99.6 billion yuan (12 billion US dollars) in 2001.

The average annual increase rate of personal income tax was 47.5 percent, or a growth of 11.8 billion yuan (1.4 billion US dollars) every year.

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