BEIJING — Chinese authorities are chasing unpaid taxes from companies and individuals dating back decades, as the government moves to plug massive budget shortfalls and address a mounting debt crisis.
“They are not grappling with existing local debt problems, nor the constraints on fiscal capacity,” said Logan Wright of the Rhodium Group, an independent research firm. “Changing central and local revenue sharing and expenditure responsibilities is notable but they have promised this before.”Chinese food and beverage conglomerate VV Food & Beverage reported in June it was hit with an 85 million yuan bill for taxes dating back as far as 30 years ago.
The effectiveness of the reforms will depend on how they're implemented, said Cui, who is skeptical that authorities will carry out a proposal to increase central government spending. That “will require increasing central government staffing, and that’s an ‘organizational’ matter, not a simple spending matter,” he said.Sudden new tax bills have hit some businesses hard, further damaging already shaky business confidence.
As local governments struggle to make ends meet, some are setting up joint operation centers run by local tax offices and police to chase back taxes. The AP found such centers have opened in at least 23 provinces since 2019. Outside experts and Chinese government advisors agree that structural imbalances between local and central governments must be addressed. But under Xi, China’s most authoritarian leader in decades, decision-making has grown more opaque, keeping businesses and analysts guessing, while vested interests have pushed back against major changes.