China: Information on wealthy people with private businesses and those working for public enterprises who are being targeted for tax evasion; whether people charged with tax evasion have access to legal representation or state protection; arrest and detention procedures and practices; type of punishment
| Publisher | Canada: Immigration and Refugee Board of Canada |
| Author | Research Directorate, Immigration and Refugee Board, Canada |
| Publication Date | 28 March 2003 |
| Citation / Document Symbol | CHN41156.E |
| Reference | 2 |
| Cite as | Canada: Immigration and Refugee Board of Canada, China: Information on wealthy people with private businesses and those working for public enterprises who are being targeted for tax evasion; whether people charged with tax evasion have access to legal representation or state protection; arrest and detention procedures and practices; type of punishment, 28 March 2003, CHN41156.E, available at: https://www.refworld.org/docid/3f7d4d6f2a.html [accessed 25 May 2023] |
| Disclaimer | This is not a UNHCR publication. UNHCR is not responsible for, nor does it necessarily endorse, its content. Any views expressed are solely those of the author or publisher and do not necessarily reflect those of UNHCR, the United Nations or its Member States. |
According to a report on China's macroeconomic performance prepared by the China Internet Information Center (CIIC), the beginning of 2002 saw a total revenue increase of 9.2 per cent and an expenditure increase of 17.8 per cent (6 Nov. 2002). The fiscal discrepancy is due, in part, to widespread tax evasion practiced by private companies and China's high-income earners (CIIC 6 Nov. 2002; BusinessWeek Online 28 Oct. 2002; Asia Times Online 20 Apr. 2002). China Daily (8 Nov. 2002) reported that the period from January to September 2002 saw a 16 per cent increase over the previous year in tax evasion cases. Private enterprises in China receive no financial support from either the banks or the state and therefore rely on tax evasion to generate profit and to expand their businesses, according to Asia Times Online (20 Apr. 2002). In his article entitled "China's Private Dilemma," Francesco Sisci of Asia Times Online maintains that, although the Chinese constitution recognizes the private sector as "'an important constituting part' of the socialist market economy," there are no laws to protect the rights of private companies (ibid.). Sisci reports that businesses may enter into covert deals with corrupt officials who have "the power to temporarily close down any business on the basis of almost any kind of suspicion" (ibid.). Somewhat similarly, BusinessWeek Online reported that
[L]ocal officials capriciously grant and revoke licenses, and companies and individuals with good connections get tax breaks, while those with fewer friends or less money for greasing palms have to pay full fare. And often, charges of tax evasion are merely a pretext to ensnare those who have fallen out of favor for some other reason (28 Oct. 2002).
However, while many of China's wealthiest people pay some amount of tax, BusinessWeek Online states that they "don't pay anywhere near the legal tax rate, which tops out at 45% on income exceeding $12,000 per month" (28 Oct. 2002).
A New York Times article describes the context and details of one businessman who was executed in China for tax evasion (11 Mar. 2001). The man's brother maintained that he "was an unwitting victim of a larger scheme in which local government officials promised businessmen tax breaks they had no authority to give" (New York Times 11 Mar. 2001). China Daily reported the executions of four people found guilty of tax evasion in one month in 2001 (8 Nov. 2002) and the 2001 New York Times article also reported that seven people had been sentenced to death in Guangdong Province since the beginning of the year (11 Mar. 2001). Reports of death sentences or executions of people charged with tax evasion in 2002 could not be found among the sources consulted by the Research Directorate.
In 2002, the Chinese government introduced new rules to improve the supervision and administration of tax collection across the nation (People's Daily 16 Oct. 2002; Eastday.com 16 Oct. 2002), and the Supreme People's Court introduced new interpretations on tax evasion and tax resistance to assist in the crackdown on taxation crime (China Daily 8 Nov. 2002). According to the People's Daily,
[t]axation offices around the country will track the incomes of rich people, scutin[ize] tax returns of advertising professionals and entertainers, develop a computerized network of tax payments and severely punish offenders (23 Aug. 2002).
New judicial interpretations state that people who resist paying their taxes could be jailed for up to seven years (HKTDC 15 Dec. 2002) and those who engage in tax refund fraud could be imprisoned for life (China Daily 8 Nov. 2002). According to the Hong Kong Trade Development Council,
[A]ny party convicted of tax evasion under one of the following two circumstances is subject to a maximum sentence of 7 years in jail and a fine not exceeding five times the delinquent taxes: First, the taxpayer fails to pay any or all of the payable tax amount and the evaded amount exceeds Rmb10,000 or accounts for 10% or more of the payable tax amount. Second, the taxpayer commits one of the following acts: forging, altering, concealing or destroying account books or accounting documents; falsifying or over-stating costs and expenses; failing to file tax returns despite having been notified by tax authorities to do so; giving untruthful information in tax returns; or defrauding paid taxes by means of forged exports or other fraudulent acts.
The document stipulates that any party convicted of one of the following five types of tax evasion acts will be liable to three to seven years' imprisonment and a fine not exceeding five times the delinquent taxes. The five acts are: organising other people to dodge taxes; the amount of delinquent taxes exceeding Rmb100,000; repeated tax dodging; deliberately causing bodily harm; other serious cases (15 Dec. 2002).
The Shanghai Star reported that the well-known Chinese actress, Liu Xiaoqing, was the first celebrity in ten years to have been arrested for evading taxes (1 Aug. 2002). The actress was arrested on 24 July 2002 after having been detained for one month by the Beijing Municipal Public Security Bureau (ibid.).
A 7 December 2002 Xinhua News Agency article reported that over 250,000 wealthy people in Hebei Province were under investigation to ensue that they did not evade paying their taxes. Those being investigated include "individual traders, contractors for companies and construction projects, university teachers, doctors, tour guides and hairdressers" as well as "private company owners, lawyers and accountants" (Xinhua News Agency 7 Dec. 2002).
In October 2002, Yang Bin, in the absence of any criminal charges being laid against him, was detained for two weeks allegedly "for his loose interpretation of the tax code" (BusinessWeek Online 28 Oct. 2002; Shanghai Daily 24 Oct. 2002).
Business people Yang Rong and Mou Qizhong, who have appeared on Forbes Magazine's wealthiest people in China list along with Yang Bin, have also been charged with tax evasion and fraud (Eastday.com 22 Jan. 2003; Shanghai Daily 24 Oct. 2002).
The Associated Press reported that Liu Yaping, a Chinese citizen with permanent US resident status, was held for five months in military detention after being charged with tax evasion and fraud (24 Jan. 2002). Yaping's lawyers maintained that he had been caught in "a power struggle between local officials" and called for his immediate release, saying that he had "suffered a brain aneurysm in police detention" but had not been treated for it (AP 24 Jan. 2002).
Shi Zhenghui, the president of Hong Kong's Global Tech company, and his colleagues confessed to evading nearly 200 million yuan (US$24 million) in taxes and they are awaiting trials in Guangdong Province (China Daily 23 Jan. 2003). Also in Guangdong Province, the names of eighteen companies charged with tax evasion were reportedly listed on the city of Guangzhou's official Website along with the names of their legal representatives (People's Daily 16 Oct. 2002).
No further information regarding legal or state protection available to people charged with tax evasion, arrest and detention procedures and practices or the types of punishment meted out, could be found among the sources consulted by the Research Directorate.
This Response was prepared after researching publicly accessible information currently available to the Research Directorate within time constraints. This Response is not, and does not purport to be, conclusive as to the merit of any particular claim to refugee status or asylum. Please find below the list of additional sources consulted in researching this Information Request.
References
Asia Times Online. 20 April 2002. Francesco Sisci. "China's Private Dilemma." Associated Press (AP) Worldstream. 24 January 2002. "U.S.-Based Businessman Released from Detention in China, Confined to Provincial City." (NEXIS)
BusinessWeek Online. 28 October 2002. "Commentary: China: Jailing Tax Cheats Is Just a Start." China Daily. 23 January 2003. "China's Biggest Tax Evasion Case Cracked in Guangdong." _____. 8 November 2002. "Tax Evasion Under Microscope." China Internet Information Center (CIIC). 6 November 2002. "China's Macroeconomic Update: World Bank Report." Eastday.com. 16 October 2002. "Government Implements Rules on Taxation." _____. 22 January 2002. "On the Trail of the Rich and Famous."
Hong Kong Trade Development Council (HKTDC). 15 December 2002. Business Alert-China. Issue 12. "Maximum 7-Year Sentence for Tax Evasion." New York Times. 11 March 2001. Craig S. Smith. "Execution in China: Through a Brother's Eyes." People's Daily.16 October 2002. "Tax-Dodging Companies Exposed as New Rules Take Effect." _____. 23 August 2002. "China to Focus on Tax Evasion by the Wealthy." Shanghai Daily. 24 October 2002. "Anti-Graft Campaign Targets Another Tycoon." Shanghai Star. 1 August 2002. "Actress Arrested for Tax Evasion." Xinhua News Agency. 7 December 2002. "Hebei Province Targets the Rich in Fighting Tax Evasion." Additional Sources Consulted
IRB Databases
LEXIS/NEXIS
Internet sites, including:
Amnesty International
Human Rights in China
Human Rights Watch
