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July 21, 2009

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SAT asks firms to check tax payments

CHINA'S top tax authority has asked about 100 major domestic companies to check their tax payments as it tightens tax collection against declining tax income this year.

The State Administration of Taxation has issued two notices this year which asked big companies in five industries - banking, insurance, petrochemicals, electronics and telecommunications - to tighten their internal tax supervision, sources familiar with the issues said.

"It's the first time for the SAT to name certain companies in the self-examination program," said an unnamed industry source. "The self-examination campaign has been existing for years, and in the past it may just be a procedural issue. This year the SAT efforts are obvious."

The listed companies are mainly big tax contributors and are from sectors with high profits or industries where tax avoidance is more frequent.

If an unpaid tax is discovered through self examination and the companies voluntarily report it to the SAT, they don't need to pay penalties on the unpaid tax. But if the tax authority finds out on its own, penalties and fees will be imposed on the overdue tax.

It is also likely that the SAT may issue a third list in the future, the sources said.

They said the SAT may find it needs to further beef up its efforts to battle tax avoidance and tax evasion especially amid the backdrop of a slowing economic growth.

China's total tax income slid 6 percent in the first half this year to 2.95 trillion yuan (US$432 billion). Corporate income tax tumbled 13.8 percent to 682 billion yuan in the same period.

China's economy expanded 7.1 percent in the first half, showing signs of recovery after the worst financial crisis since the 1930s.


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