Big Tech’s regulatory challenges in China include closer scrutiny of taxes, but many see this as long overdue
- While warning Big Tech about common misconduct, regulators have also ordered companies to carry out ‘comprehensive’ investigations into tax-related issues
- Lax tax collection among online merchants in China has become an endemic problem due to the digital economy’s break-neck growth
Wu Xi owns two screw shops on e-commerce platform Tmall. Launched in 2017, they currently employ 25 people and bring in about 2 million yuan (US$308,937) every month, which by law requires him to pay taxes on each transaction.
Wu says he has never thought about tax evasion but admits that he has failed to report some transaction for tax purposes because in many cases individual buyers did not request fapiao, China’s official invoices.
Wu is among millions of online merchants in China that have been underpaying taxes, intentionally or unintentionally, due to a taxation regime that has failed to keep pace with the country’s fast-growing digital economy.
After slapping a US$2.8 billion fine on Tmall owner Alibaba Group Holding last month for antitrust violations, China’s regulators – including antitrust watchdog the State Administration for Market Regulation (SAMR), internet regulator the Cyberspace Administration of China (CAC), and the State Taxation Administration – have since hauled in 34 of the country’s biggest tech companies for a lecture on respecting industry rules and safeguarding consumer rights. Alibaba owns the South China Morning Post.
While warning Big Tech about common misconduct, such as anti-competitive behaviour and bad data privacy practices, regulators also ordered the companies to carry out “comprehensive” investigations into tax-related issues on their platforms and to engage in “self-correction”.
