China hits back at Wahaha tycoon over claims of excessive fees

PUBLISHED : Thursday, 19 January, 2017, 9:00am
UPDATED : Thursday, 19 January, 2017, 9:00am

Beijing has hit back at the founder of the mainland’s biggest beverage producer, Wahaha, who had complained of the high burden of taxes and fees on companies.

In a statement published by the National Development and Reform Commission yesterday, Beijing said it “only” charged ­Wahaha 317 types of fees in 2015, fewer than the roughly 500 types of fees that company chairman Zong Qinghou complained about publicly at the end of last year.

The latest response follows criticism from various Chinese entrepreneurs over high taxes and fees that they say are hurting the country’s industrial economy, particularly manufacturing that has already suffered from rising labour and land costs.

Cao Dewang, founder of Fu­yao Glass, a leading maker of car windscreens, said last year that heavy taxes on companies in China eroded their cost-of-production advantages over international rivals such as those in the United States.

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Zong, who set up Wahaha in Hangzhou in 1987, echoed Cao’s concern in an interview with Zhejiang TV in December in which he referred to “messy” government fees.

“Based on our calculation, we have to pay more than 500 types of fees,” Zong said. “That still counts as a small number, compared with other state-owned companies across the country. Between January and November, we paid 40 million yuan (HK$45 million) in fees.”

But the NDRC said many of the fees Wahaha said it paid since 2013 had actually been scrapped and not imposed. These included charges for company registrations, land acquisition management and public record keeping.

It said Wahaha paid more than 74 million yuan in fees in 2015, with most of the money going towards earmarked government funds and for administrative charges.

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Government officials said they found only one instance of mischarging in an audit of Wahaha’s records – in 2015, the company paid a type of approval fee, that had already been abolished by the central government, for a factory in Guizhou.

The money was ordered to be refunded, the NDRC said.

“Problems raised by Wahaha indicate that when our economy faces downward pressure, companies are more sensitive to the burden of fees,” it said.

Zong, 72, started his beverage kingdom by selling children’s ­nutritional supplements in ­­­ ­Hang­zhou.

In the Zhejiang TV interview last month, Zong said he had seen little effort from the government to boost domestic demand by increasing disposable income through tax cuts. Instead, investment remained the main driver of growth, in spite of Beijing’s call for replacing it with consumption and services.