The mainland’s first major case of cross-border tax evasion involving a large US multinational has been revealed by state media, with Xinhua saying Beijing would step up its fight against international tax evasion.
The Hong Kong government would be expected to assist Beijing in stepping up the fight against cross-border tax evasion, Joe Chan, a partner at accounting firm EY, said.
A US multinational had admitted tax evasion and its mainland subsidiary had agreed to pay the central government 840 million yuan (HK$1.06 billion) in back taxes and interest, as well as more than 100 million yuan in additional taxes a year in the future, Xinhua reported on Sunday.
“Because the amount involved is huge and the impact is enormous, this case has been called China’s first major anti-tax evasion case,” it said. “This case highlights the common tactic of multinationals to avoid tax, by transferring profits through various countries, taking advantage of differences in their tax rates.”
The state news agency did not name the company, identified only as M, but said it was a “globally well-known company that has long been among the world’s 500 biggest firms”, headquartered in the US, and had established a wholly-owned foreign enterprise in Beijing in 1995.