Tax collectors get tough on expats

PUBLISHED : Thursday, 18 November, 2004, 12:00am
UPDATED : Thursday, 18 November, 2004, 12:00am

Foreigners fail to pay about $10b a year, according to some analysts

Mainland tax collectors appear to have launched a low-profile nationwide campaign against foreigners evading personal income tax.

In July three foreign nationals working for the Beijing branch of an overseas firm collectively paid about 23 million yuan to municipal authorities in back taxes, the Beijing Youth Daily reported yesterday.

The payments were for tax accrued between 2001 and 2003 and were the biggest of their kind recorded by the Beijing Municipal Tax Bureau this year.

The tax bureau in the Haidian district of the capital had recovered nearly 28 million yuan in outstanding taxes by the end of last month, while the municipal bureau received nearly three times that amount during the same period.

Some analysts estimated foreign nationals failed to pay about 10 billion yuan in taxes each year, the Beijing Youth Daily reported.

The tax-free threshold for foreigners living on the mainland is 4,000 yuan, compared with the 800 yuan tax-free income granted to local employees. For every yuan foreigners earn above 4,000 yuan, they are taxed at the same rate as mainlanders - between five and 45 per cent.

But foreigners can apply to have rent and their children's school fees deducted from their taxable income, and money earned overseas is not included in the bill.

Analysts say foreign nationals often default on their taxes because the laws are vague and limited.

Three years ago, Microsoft China staff were ordered to pay 51 million yuan in back taxes on overseas share gains, the China News Service reported.

Microsoft said businesses were not clear on issues such as tax reduction and claims, and many enterprises had a different or unclear understanding of how to execute tax policies.

In February last year 52 foreign staff employed by an FAW-Volkswagen joint venture in Changchun had to hand in 5.74 million yuan in taxes, based on their income the previous year, the People's Daily reported.

However, mainland tax authorities denied a crackdown was under way. 'We are doing our regular checks,' said one official from the propaganda department of the Beijing Municipal Tax Bureau's division for overseas issues.

A Beijing accountant dealing with foreigners' tax issues said the 4,000-yuan threshold was seen as too low and the tax rate too high.

'The whole tax system is not sound and not mature,' she said. 'Many foreigners work without contracts and their salaries are paid in cash. Therefore it is hard for the government to chase their taxes.'