Real estate tycoon Ren Zhiqiang considering suing CCTV over unpaid tax allegations
Real estate tycoon Ren Zhiqiang has threatened to sue China’s national broadcaster on Monday over allegations his company owes 54.9 billion yuan in unpaid tax.
Ren refuted the allegations made on Sunday by CCTV in a series of posts on his Sina Weibo microblog, which is followed by almost 16 million people.
“I am looking into the matter of publicly suing CCTV,” he wrote on Monday. “They don’t report on matters regarding people’s safety in a timely manner, but make an effort to create rumours and undermine the reputation of companies and industries.”
The programme Weekly Quality Report said the arrears, which just for his company equalled the domestic product of Mongolia last year, were related to unpaid land appreciation tax (LAT), a levy introduced in 1994 on gains realised on the transfer of real estate.
Ren’s company was not the only one mentioned in the brief report. Total unpaid taxes by 45 real estate developers reached 3.8 trillion (HK$4.8 trillion) yuan in unpaid LAT from 2005 to last year, according to CCTV – roughly the gross domestic product of Switzerland last year.
The broadcaster asked a Beijing-based tax expert Li Jinsong from the Beijing Yitong law firm to calculate the total arrears and had them cross-checked by Chinese Academies of Sciences scholar Kang Xiaoming. According to their calculations, these property developers had to pay 4.6 trillion yuan in tax, but only paid 800 billion yuan - just 17.4 per cent of the total.
The programme argued that the tax had been introduced to counter a real estate bubble and suggested that China’s real estate prices could have been lower had developers played by the rules.
Ren countered on his weibo account that CCTV’s take on the tax arrears was “ignorant” and had failed to take into account the delayed payment procedures and arrangements with local governments.
The state broadcaster has launched a series of critical reports on foreign and local companies in recent months, targeting Apple, Starbucks and Tencent among others. “Will developers be the next Starbucks?” Ren asked in a post, referring to those earlier reports.
Johnson Hu, a Hong Kong-based property analyst at CIMB-GK, said the projections used in the calculation were off the mark, using “very aggressive assumptions”.
Hu concluded that it was possible that the actual collection of LAT was below what developers should pay. “Some local governments may not strictly implement LAT collection,” he said. “[But] we see implementation has become more stringent over the past couple of years.”