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Total taxes paid in China rose 11.2 per cent in 2012 to 11.07 trillion yuan, but the mainland still loses billions to tax evaders. Photo: AFP

China's efforts to curb tax evasion net extra HK$59b

The mainland's efforts to fight tax evasion brought in 46.9 billion yuan (HK$59.2 billion) of additional taxes in 2013, 38 times more than 2008, according to the website of the State Administration of Taxation.

Since 2011, China's transfer pricing agreements with Hong Kong and Macau have saved 34.57 billion yuan in taxes for companies and individuals in Hong Kong and Macau, says the administration.

Transfer pricing refers to the allocation of profits among different related companies and jurisdictions to minimise taxes.

The taxes collected from "non-resident enterprises" in China more than tripled to 117.2 billion yuan in 2013 from 2008, said the tax agency. A non-resident enterprise is a multinational with top management based outside China.

China exchanged tax information with 46 countries last year, recovering 5.6 billion yuan in taxes, said the agency. In comparison, it exchanged tax information with 18 countries in 2008.

China must make its presence felt more in international efforts to fight "base erosion and profit shifting", said deputy tax commissioner Zhang Zhiyong.

Last September, G20 nations including China endorsed an international plan to combat the global practice of shifting funds to low-tax jurisdictions to evade taxes.

China must "make great effort in expanding its anti-tax evasion work", strengthen tax collection from non-resident enterprises and its international tax collection, and take part in international exchanges of information on tax avoidance and curb cross-border tax evasion, said Zhang at a meeting on international tax collection held in China on March 18.

"The continually increasing competition of tax sources has placed greater demands on our nation's tax collection," said Zhang, adding that China must expand international co-operation to increase its voice in the global fight against tax avoidance.

Zhang reiterated tax commissioner Wang Jun's goal of upgrading China's tax system within one year and creating a visible transformation of the system within three years.

As of November 2011, the mainland was the world's eighth biggest tax loser, losing US$134 billion from evasion a year, according to the Tax Justice Network, an international tax advocacy group.

The network said the US was No1, with US$337.35 billion evaded each year.

The total collection of tax in China rose 11.2 per cent to 11.07 trillion yuan in 2012, according to the taxation administration.

This article appeared in the South China Morning Post print edition as: China's efforts to curb tax evasion net extra 47b yuan
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