Zong Qinghou

Tycoon suspected of failing to report 300m yuan income

PUBLISHED : Monday, 14 April, 2008, 12:00am
UPDATED : Monday, 14 April, 2008, 12:00am


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The founder and chairman of the mainland's largest drinks maker, Wahaha Group, is suspected of failing to report nearly 300 million yuan (HK$333.5 million) in personal income, mainland media say.

Zhejiang's Revenue Department has been auditing the accounts of Zong Qinghou, 63, ranked China's 63rd-richest man by Forbes last year, Caijing, a well-known business magazine, reports in its latest issue due on stands today.

Authorities began an investigation last November after receiving a tip-off from someone calling himself a 'taxation enthusiast'.

Caijing said Groupe Danone of France had paid Mr Zong US$71 million in service fees, share repurchases and dividends from incentive shares between 1996 and 2006 since Danone established a joint venture with Wahaha in 1996.

At Mr Zong's request, the money had been deposited into various bank accounts, including that of his wife Shi Youzhen, his daughter Zong Fuli and Du Jianying , the former party head of Wahaha Group.

According to Caijing, Mr Zong did not report the income gains to the Revenue Department until he was exposed.

Caijing said revenue officials had admitted Mr Zong had engaged in tax evasion, since mainland residents should pay personal income tax no matter where their earnings came from. But it is still unknown whether Mr Zong will be convicted of tax evasion because he paid more than 200 million yuan to the Revenue Department last October - one month before the authorities placed the case on file.

According to mainland criminal law, only taxpayers who fail to pay or pay less than 90 per cent of due tax on debts of 10,000 yuan or more can be convicted and punished.

Caijing said Mr Zong might be exempt from criminal punishment as he had paid more than 90 per cent of the tax owed before the case was filed.

The report said Mr Zong was still under investigation and more offences by him might be discovered.

Mr Zong has also been involved in another dispute between Wahaha and its estranged joint-venture partner Groupe Danone.

Danone and Wahaha formed a joint venture in 1996 - in which the French company owned a 51 per cent stake.

Last year Danone accused Mr Zong of illegally using the Wahaha brand for his own companies. But both sides said last week that they would return to talks and end litigation.