Customs in crackdown on import duty cheats
Fong Tak-ho in Beijing
Customs officers are cracking down on businesses which are trying to avoid paying import duty in an attempt to keep a lid on the government deficit.
In the six months to June, 272 cases of valuation fraud were uncovered involving 380 million yuan (HK$357 million) in unpaid duty, said Sheng Guangzu, deputy-director of the General Administration of Customs.
As part of China's entry to the World Trade Organisation (WTO), import tariffs on a wide range of goods have been reduced.
Many companies have been taking advantage of this by 'document laundering' - turning high-duty goods into low-tariff items, under-reporting the size of shipments and quoting lower prices for transactions - to avoid paying Customs duty.
Tariff income in the first eight months of this year was 160.8 billion yuan - 3.3 per cent down on the same period last year.
Mr Sheng said tax evasion had become a growing problem since China's entry into the WTO.
'In the face of the new situation of valuation fraud this year, Customs is intensifying its efforts against smuggling,' Mr Sheng said.
While smuggling is not a new phenomenon in China, the entry to the WTO had created a new playing field, he said.
One area of change involved a new method to assess the value of imports based on the actual price of transactions.
Mr Sheng said Customs had blacklisted 14 companies for evading taxes, including nine in Guangdong province, as part of the crackdown on tax dodgers.
The crackdown comes as the government struggles to raise tax revenue to keep its deficit down.
Although revenue for the government, both central and local, increased 10.7 per cent in the first seven months of this year, expenditure increased 18.7 per cent.
Huang Yiping, a senior economist with Salomon Smith Barney in Hong Kong, estimated that the government's deficit would reach 424.5 billion yuan this year, compared with the 309.8 billion yuan forecast.
Declining tax revenue is a big worry for the government. Last November, Premier Zhu Rongji chaired a meeting where he demanded that efforts be stepped up to raise revenue.
Mr Huang conceded the crackdown by Customs might not have a big impact on government revenue, as tariffs accounted for only a small share of overall income.