China joins anti-tax evasion convention

Want China Times, Kuo Chi-yun and Staff Reporter 2013-08-31

Wang Jun of the State Administration of Taxation of China, shakes hands
 with OECD secretary-general Angel Gurria after signing the Multilateral Tax
Convention in Paris on Aug. 27. (Photo/Xinhua)

In demonstrating its determination to crack down on tax evasion, China has partnered with the European Commission and OECD (Organization of Economic Cooperation and Development) in signing the the Multilateral Convention on Mutual Administrative Assistance in Tax Matters this week, becoming its 56th signatory.

China's participation in the convention may have considerable influence on Taiwanese-invested companies in China, especially those who often conceal their profits offshore, a practice which will be liable to huge fines under the rules of the convention, said Tuan Shih-liang, a certified public accountant at PwC Taiwan.

Crackdowns on cross-border tax evasion have been a major global issue since the last financial crisis in 2008, with many multinationals such as Google, Amazon, Apple and Starbucks having been criticized for committing paying low amounts in taxes despite their huge profits. The signing of the convention is meant to underscore the Chinese government's determination in dealing with problems of tax-base erosion and profit transference.

Insiders noted that many Taiwanese businesses have invested in mainland China via tax havens such as the Cayman Islands. Tuan noted that the agreement allows taxation authorities of signatory nations to provide specific income information about taxpayers to other signatories, greatly boosting the risk of tax investigations about Taiwanese businesses.

China is the last G20 member nation to sign the convention, underscoring the consensus among developed and emerging nations on cracking down on cross-border tax evasion.

China started tightening its regulations in 2011. The effort generated 34.6 billion yuan (US$5.7 billion) of extra tax revenue in 2012, 27.9 times the amount in 2008, according to the State Administration of Taxation.

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