Beijing’s Ritz-Carlton hotel fined 2 million yuan for raising rates after China’s tax reform

Five other firms also penalised for increasing prices despite new system designed to lower their taxes

PUBLISHED : Friday, 29 July, 2016, 2:14pm
UPDATED : Friday, 29 July, 2016, 11:16pm

A Ritz-Carlton hotel in the Chinese capital has been fined 2 million yuan (HK$2.3 million) for raising prices on the pretext of covering extra taxes.

The luxury hotel in downtown Beijing had increased its food charges after the government’s implementation of a major tax overhaul.

Hotels in China raise rates – and ire – despite lower taxes

The National Development and Reform Commission said on Friday that Ritz-Carlton had used the tax reform to impose additional charges on food served in the hotel.

The case comes after a series of hotels and other businesses tried to increase their prices following a new value-added tax system that took effect in May.

The tax reform was aimed at lowering the tax burden of businesses, but many firms complained that it actually added to their taxes, and increased their prices as a result.

New China consumption tax seen as encouraging mainlanders to spend more at home, less abroad

The Chinese government has promised that the new tax regime would be more tax-friendly to service providers from hotels to banks, but many businesses appear to find it confusing and costly.

A number of global hotel chains in China, including Starwood Hotels and Hyatt, had earlier been told to stop after they started charging additional value-added taxes.

Ahead of the full roll-out of the new system in May, Finance Minister Lou Jiwei had criticised such businesses’ extra charges on the pretext of the tax overhaul as “groundless”.

Lou said the pilot scheme, which covered 5.9 million firms from 2012 to 2015, had already saved businesses some 641.2 billion yuan in taxes.

‘Like sacrifices to angry god’: how China’s taxes are bringing down businesses

Yet, figures of overall tax revenues have yet to show the promised positive effects of the “tax cuts” for firms.

China’s tax revenues rose 8.6 per cent in the first half of the year – faster than its economic growth rate of 6.7 per cent.

Besides the Ritz-Carlton, five other businesses were also fined 2 million yuan each for similar offences.

Crowne Plaza Beijing Sun Palace increased its restaurant menu prices by 6 per cent on the pretext of the tax overhaul, the commission said on its website.

Developers set to benefit under China’s VAT pilot scheme

Shanghai’s New World Development, a property development firm, raised 143 tenants’ rental rates by some 11 per cent. The China World Trade Centre, another big property-leasing firm, increased 119 tenants’ rental rates by 5 per cent and property management fees by 6 per cent, according to the commission.