China’s tax clampdown brings in US$24 bil from offshore trusts

China’s ultra-wealthy have declared more than RMB160 billion (RM97.71 billion) in back taxes tied to offshore trusts, bowing to pressure from authorities increasingly eager to expand the tax dragnet far beyond their national borders.

The October receipts fuelled an almost 90% surge in national personal income tax revenue for the month, according to the official Xinhua News Agency, which said the vast majority of taxpayers cooperated proactively. Authorities collected over RMB120 billion of the haul in October, with some of the declared amount still to be paid.

The collection marks Beijing’s most aggressive tax enforcement campaign in decades as authorities move to shore up state coffers by targeting the nation’s wealthiest people. High-net-worth individuals were given until late October to pay bills on their overseas trusts without facing extra charges.

The report added that individuals who did not file their taxes or filed inaccurate information may face tax audits and public exposure.

The push followed an announcement in July that China would formally tax offshore trusts set up by its citizens, closing a loophole long used by business dynasties for asset protection and succession planning. Tax authorities also assembled specialised task forces dedicated to auditing the ultra-rich, with some units assigned exclusively to scrutinise individual billionaires, Bloomberg previously reported.

While the revenue collected so far falls well short of the US$100 billion (RM407.46 billion) worst-case scenario projected by Barclays analysts for Hong Kong assets, it aligns closely with domestic tax lawyers’ expectations of a US$15 billion to US$25 billion haul. Regardless of the eventual tally, Beijing’s tightening regulatory grip is poised to diminish the appeal of offshore trusts among China’s business elite.

The country’s escalating tax grab has fuelled anxiety among the rich, sending individuals scrambling to calculate their liabilities and secure immediate liquidity. Some wealthy citizens have rushed to secure foreign passports over fears that Beijing could introduce an exit tax on emigrants, people familiar with the matter said previously. Others have resorted to liquidating stock holdings or taking out overseas margin loans to meet their tax obligations.

Source: Theedgemalaysia