Local governments in China have asked several companies to foot tax bills since the 1990s, highlighting their need for funding given an uneven economic recovery and a persistent slump in the housing market.
A number of listed companies have said in stock filings in recent months that they have received government demands to pay tens of millions in back taxes and warned investors that their earnings could be hit.
VV Food & Beverage Co. reported last week that the liquor maker was ordered to pay about 85 million yuan ($11.7 million) for income it “failed to disclose” for about 15 years starting in 1994. ChinaLin Securities Co., Ningbo Bohui Similar statements were made by Petrochemical Technology Co., Zangge Mining Co. and PKU HealthCare Corp.
China’s local governments are facing unprecedented pressure to raise revenue as economic growth slows. slowdown And conclusion of a contract The real estate market has led to a drop in income from land sales. Their already high stock of debt limits their ability to further increase borrowing, forcing the central government borrow more and give them the funds.
The tax refunds “are likely related to local governments’ financial difficulties,” said Xing Zhaopeng, an analyst at the Australia and New Zealand Banking Group. “I think they need money to pay by the end of the quarter,” because regional governments typically pay contractors on government projects then, he added.
In the first four months of the year, local governments recorded less than 5.8 trillion yuan in revenue under the general government budget and public funds account, which includes taxes and revenue from land sales. The figure is down from more than 5.9 trillion yuan in the same period last year, according to the Ministry of Finance.
Their spending also fell to just under 10 trillion yuan from 10.4 trillion yuan a year earlier.