Golf club threatens split over tax claim

The Chinese partner of a Sino-Japanese golf club, which is allegedly involved in a tax scandal in Shenzhen, will terminate the co-operation contract if the Japanese side fails to pay back-tax to the Shenzhen Government next week.

The Baori Golf Club, in Shenzhen's Baoan district, has allegedly evaded paying up to 70.62 million yuan (HK$65.88 million) since its establishment in 1987, Shenzhen tax officials claim.

The club has more than 3,000 members, the majority Japanese, but also has members from Taiwan, South Korea and Hong Kong.

The original annual membership fee was more than 300,000 yuan but was now just over 200,000 yuan, Feng Youwang, the club's deputy manager, said.

Dong Kejia, a director of the Shenzhen Tax Bureau, said: 'The golf club has owed tax which is related to income generated from its membership fees. The tax amount is up to 70.62 million yuan and the penalty fee is 20 million yuan.

'The tax bureau has ordered the club to pay the amount before April 25, otherwise the company will be punished according to our regulations,' Ms Dong said.

The bureau last week confiscated 10 golf club cars.

Shenzhen sources said the investigation started in 1993.

Mr Feng admitted the club had never paid tax generated from membership fees.

However, he said the Chinese side should not be responsible for the tax burden. 'It is our Japanese partner's duty to file the tax. They are responsible for membership recruitment,' Mr Feng said.

The club's board met on Monday and the Chinese side demanded the Japanese settle the tax dispute before next week's deadline.

The representative of the Japanese side told the meeting the Japanese did not understand Chinese law and did not realise the need to pay tax in China, Mr Feng quoted the representative as saying.

'He also argued that huge costs had been incurred on publicity and recruitment in Japan and other countries and the expense should be tax deductible,' Mr Feng said.

Meanwhile, Japanese media quoted the Japanese partner as saying tax had already been paid to the Japanese Government. Mitsuhiro Yokota, director of the economic department of the Japan External Trade Organisation, said: 'The Japanese company told the Japanese press they had paid the tax to the Japanese Government. The company head has claimed that according to the Sino-Japanese Double-Taxation Prevention Treaty, there is no need to pay tax to China.' Hidemi Maruta, a tax expert at the Japanese Consulate in Hong Kong, said: 'Whether China or Japan has the right to collect tax from this Japanese company depends where the taxable profit is generated.' Ms Dong said the Japanese partner could not seek treaty protection since the golf club was operating in China, not Japan.