China Reopens Tax Cases of Shut Businesses as Revenue Pressure Grows

China intensifies tax scrutiny of closed businesses amid economic, fiscal pressures

Beijing, September 14

Recently circulated videos on Chinese social media platforms, including WeChat and Douyin, suggest that tax inspections, which had previously concentrated on larger companies, are increasingly being extended to individual businesses. In one case reported in Jiangxi Province, the owner of an individual business that had already been deregistered was ordered to have the tax registration reinstated and undergo an inspection. A notice circulating online stated that the local tax bureau had found that the business had not accurately reported its taxable income.

The notice said the individual would be required to undergo an inspection within five working days and submit supporting documents related to costs and expenses. These reports have raised concerns among business owners that businesses that have already shut down could still face fresh tax audits. A self-employed business owner in Nanchang, China, identified by the surname Shi, told the publication that a fellow business owner who had closed a breakfast shop had been contacted by tax authorities regarding the business's past income.

"This is too much," Shi said. He explained that the business owner had cancelled the business licence and could no longer operate the shop, which had also been transferred to another person. According to Shi, the tax bureau had retained transaction data from online platforms as well as bank collection records and was now seeking to examine the former owner's income and demand additional tax payments. He said the individual had paid taxes every year and questioned the basis for the additional collection.

A former individual business owner in Hunan Province also told The Epoch Times that many small merchants had already exited the market, while some were now facing scrutiny of their previous financial records. He said tax authorities had recently begun examining the old accounts of individual businesses. According to him, authorities had first inspected listed companies, followed by small and medium-sized enterprises, and were now turning their attention to individual businesses, as cited by the TET report.

The Chinese regime has not publicly revealed the number of individual businesses being audited, the regions involved, or the amount of additional tax that has been collected. As a result, the available reports do not establish whether the cases being reported are isolated enforcement actions or part of a wider campaign to collect taxes from businesses that have already ceased operations.

The reported tax inspections have also triggered criticism on Chinese social media, with some users arguing that small businesses are already facing difficulties due to weak consumer demand and declining incomes. Some Chinese netizens have associated the reported inspections with the country's broader economic slowdown and increasing fiscal pressures on local governments, TET reported.

— ANI