Evading corporate taxes could soon have serious repercussions in China, as authorities are contemplating a blacklist, reliant on the social credit system, that would among other things prevent offenders from purchasing train or flight tickets for a year.
Allaying fears that the measure would seek to impose stringent punishment for economic offenders, the State Administration of Taxation said it would be restricted to tax-related activities.
The system would be like the financial credit tracking system, with violators classified to a D level, suggesting a “not-so satisfactory” credit performance. Subsequently it will share the information with 20 other authorities and the offenders could face as much as 18 penalty measures.
The blacklist was set up after the National Development and Reform Commission, the economic regulator, promoted a credit blacklisting mechanism that restricted access to financial support from the government for over 6,000 enterprises due to their bad credit performance.
“The taxation blacklist has proved to be effective, and will be a trendsetter for credit evaluation in other fields,” said Tang Jiqiang, a professor at the Southwestern University of Finance and Economics in Chengdu.
Since 2014, the regulator has announced 14 blacklists of tax violators. The blacklists reveal detailed information of those who have violated regulations, such as tax evasion.
The blacklist mechanism in taxation underwent an upgrade in 2016. The amended version has set 1 million yuan ($146,649) as the criterion for tax evaders to be listed on the blacklist. It also offers opportunities for tax offenders to clear their records after they pay off their taxes and fines.
Companies in the blacklist are already making amends to clear their outstandings, with 998 firms clearing their dues by the end of 2017. There were a total of 7,294 blacklisted companies at the end of last year.
