Local governments hide 79b yuan in revenue

PUBLISHED : Tuesday, 15 June, 2010, 12:00am
UPDATED : Tuesday, 15 June, 2010, 12:00am


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Local governments in 12 provinces and 26 cities are owed more than 75 billion yuan (HK$85 billion) in income from land leases but have not shown the amounts in their budgets, the National Audit Office says.

The office released its findings after looking into the accounts of 17 provinces, and cities in those provinces, between January 2008 and June last year. Income not shown in budgets would normally escape the eyes of the central government, allowing local authorities to avoid paying a portion of it to Beijing.

The report said 79.4 billion yuan in uncollected non-tax income in the accounts of 12 provinces and 26 cities had not been recorded in budgets, of which 94.8 per cent, or 75.2 billion yuan, was from land leases.

The survey also found that 62.5 billion yuan of collected non-tax income had not been recorded.

Money from land leases to developers and factories has become an important source of income for many provincial governments, prompting massive land requisitions that open the door to corruption and embezzlement of public funds by local officials.

Excluding such data from budgets makes it extremely hard for auditors, local lawmakers and the public to monitor how local governments spend their income.

The audit office also found that in the same period, seven provincial governments and 59 city, county or district governments had illegally given unauthorised tax breaks or subsidies worth 2.57 billion yuan to enterprises in order to attract their business. Four provincial and 10 city, county or district governments had given 463 million yuan in tax rebates to top company officials in the form of housing or car subsidies, or other rewards.

Rampant irregularities were also found in the management of central government funding.

The audit office said many local governments have their funds scattered across a large number of accounts in commercial banks - each on average has more than 50 bank accounts - making it difficult to track their financial assets.

A survey of the books of Air China Group in the 2008 financial year showed that due to chaotic accounting, unscrupulous lending and non-standard transfer of assets in subsidiaries, the group overstated its debts by 276 million yuan. It also failed to record profits of exactly the same amount.

In the same period, China Southern Airlines failed to record profits of 2.59 million yuan due to non-standard and lax accounting. China Eastern Airlines failed to record 2.9 million yuan in assets, 12.4 million yuan in profits and overstated its debts by 9.48 million yuan.

The audit report also shows that state power company China Huadian Corporation overstated its assets by 233 million yuan and its profits by 198 million yuan and failed to record 21 million yuan in debts.

Meanwhile, state-owned mining and energy company Shenhua group failed to record 891 million yuan in assets, 137 million yuan in debts and profits of 755 million yuan.

Unbalanced budgets

The amount of revenue undeclared by local governments that involves land leases, in yuan: 75b yuan