China launches two-month probe into abuses of new tax rules

China plans billions of dollars in tax cuts and infrastructure spending to shore up economic growth.
China plans billions of dollars in tax cuts and infrastructure spending to shore up economic growth.PHOTO: REUTERS

BEIJING (REUTERS) - China's tax authority has launched a two-month investigation into tax-related third-party service providers to ensure companies do not incur additional costs as Beijing presses for tax reforms and fee cuts.

China plans billions of dollars in tax cuts and infrastructure spending to shore up economic growth that is at its weakest in almost 30 years due to softer domestic demand and a trade war with the United States.

The inspections of tax-related service companies and agencies will be carried out across the country until May 31, state news agency Xinhua said on Sunday (March 31), citing a statement by the State Taxation Administration.

The campaign will focus on service providers which may have sold companies unnecessary services or products, or unfairly hiked service charges as companies adjust to Beijing's new rules intended to ease strained corporate balance sheets by cutting trillions of yuan in taxes and fees.

Tax officials at any level who are found to have colluded with third-party agencies suspected of wrongdoing will be removed from their posts and handed over to judicial authorities, the statement said.

Premier Li Keqiang said during the annual Boao forum last Thursday that the taxation department should promptly prevent abuses by service providers that offset the positive effect of tax reduction.

Mr Li announced earlier this month that China would cut the value-added tax (VAT) for the manufacturing sector to 13 per cent from 16 per cent, effective on Monday. VAT for the transport and construction sectors would also be cut to 9 per cent from 10 per cent.