China trains eye on tax dodgers

Actress Liu Xiaoqing was arrested for tax fraud last week

China is increasing its vigilance over high-earning individuals in an attempt to crack down on income tax evasion, according to the state-controlled China Daily.

The report follows the arrest in Beijing last week of a famous actress, Liu Xiaoqing, on charges of large-scale tax evasion.

There are at least 200,000 enterprises in the Chinese capital whose employees paid no individual income tax last year, the paper said, citing the municipal taxation department.

According to the paper, the department will now monitor people whose annual salaries exceed 100,000 yuan (US$12,000) in more than 300,000 enterprises from October this year.

Average annual income in China is $800, though people in the cities earn much more than in the countryside.

In addition, the authorities will supervise the 100 highest-paid people in each district or county, including many media stars and chief executives, the paper said.

Crackdown

According to the China Daily, Beijing and the provinces of Zhejiang in the east and Guangdong in the south, known as the "cradles of the wealthy", have all taken steps to improve income tax collection.

Last year, Zhejiang conducted spot-checks on more than 23,000 private enterprises, the paper said.

In Guangdong "special files" will reportedly be kept on the highly-paid, and the provincial capital, Guangzhou, has more than 7,000 people on its main monitoring list, according to the paper.

China is under increasing pressure to boost tax revenues in order to plug a budget deficit which, swelled by a series of major construction projects, reached $31bn last year, official figures showed.

Some analysts believe the true figure could be higher still.

But persuading people to pay tax in what was until recently a planned economy with salaries and benefits fixed by the state is proving no easy task.

Analysts add that while China's growing number of millionaires provide a potentially rich source of tax revenues, they are unlikely to pay up unless the government lowers the top rate of income tax, currently set at about 45%.