A Hebei businessman was told by local tax officials that he owed "overhead levy" for an imminent "Diaoyu Islands war" with Japan.
The tax adds to the economic burden felt by the northern province's small- and medium-size businesses, which face increasing pressure from a slumping economy, the Beijing News reported Wednesday.
Despite a law forbidding local and national governments from taxing in excess, a new phenomenon has developed in which businesses have been forced to pay so-called “overhead levy” or taxes “in advance”, said the newspaper.
“In certain economic circumstances, the government should be siding with [businesses] and not killing the goose that lays the golden eggs,” said Zhang Shun, owner of a processing plant in Xian County, in southern Hebei province.
With local tax revenues falling compared to previous years due to the country’s slowing economic growth, local tax collectors have been reverting to desperate measures to meet their fiscal targets, the newspaper reported.
In late October, Zhang received a phone call from Xian County's tax bureau, requesting to schedule a meeting. Upon his arrival at the meeting, Zhang reported seeing other businessmen waiting in the corridor. Each was then called into the fourth-floor office and asked to pay tens of thousands of yuan in taxes.
“I do not owe any taxes. What are you talking about?” Zhang asked.
“Our department secretary says pay first and then we’ll talk about it later,” a department staff member replied, according to the report.
Hebei entrepreneur Li Jianguo was called to a similar meeting, albeit given a more peculiar justification for the tax.
Li was told that because of fraying Sino-Japanese relations over the Diaoyu islands dispute, war was likely to break out and it would be the duty of businesspeople to “support the country”.
Tensions between Beijing and Tokyo have intensified recently over contesting territorial claims over islands, called Diaoyu by the Chinese and Senkaku by the Japanese, in the East China Sea.
Earlier this year, the Ministry of Finance and the State Administration of Taxation stressed the need to prevent excessive taxation.
Lu Jinchong, deputy secretary of the State Administration of Taxation, has admitted to the Beijing News that the Hebei department was facing difficulties in meeting revenue targets but knew nothing of the recent spates of excessive taxation.