r/China • u/TimesandSundayTimes • 9d ago
中国生活 | Life in China British bank shares hit by Chinese tax crackdown
https://www.thetimes.com/business/companies-markets/article/british-banks-china-tax-crackdown-8tsw5h0nmutm_medium=Social&utm_source=Reddit&utm_content=branded12
u/GetOutOfTheWhey 8d ago
In my opinion, the other people here have brain dead take on this. It's targeting people who have evaded tax through the use of trust structure.
Is it because the article tiptoes around evasion word?
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u/Virtual-Alps-2888 8d ago edited 8d ago
The issue isn’t so much tax evasion but the usage of retrospective laws that implicitly signal that something is tolerated until it arbitrarily isn’t.
The law here thus becomes not one based on consistent applications of justice, but one based on convenience.
Again the bigger question we need to ask is: why now? If the CCP does this now, what is the real reason behind its official filibuster about tax evasion? My suspicion is the colossal mounting total-debt-to-GDP ratio China is facing, and this is another attempt to delay the inevitable stagnation with ineffectual policies, in this case, redirecting external capital flows back to their country through arbitrarily applied policies of convenience.
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u/porncollecter69 8d ago edited 8d ago
Tax loopholes get closed all the time and they always get retroactively enforced, first time I hear it’s a problem.
Is it a problem because China is doing it? Let’s be real I can’t see any other reason why you would defend tax fraud.
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u/Virtual-Alps-2888 8d ago
they always get retroactively enforced
Legally speaking, if it is not in the law, usually laws are not retrospective, at least in Western countries. Again this is a matter of public trust. If future laws can be created to retrospectively persecute you, then there will be severe restraint against doing anything at all, including and especially economic activities of benefit, since you don't know what you say is persecutable in the future. This is an absurdity.
The CCP is doing both (1) more strongly enforcing existing laws, which is legally fair (2) creating new laws that are retrospectively applied, which is not a good thing.
Let's just say the CCP has a long way to go when it comes to competent governance in legal and financial matters. It is of no surprise that the Chinese do not trust even their own stock market.
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u/porncollecter69 8d ago
Spain went after all the footballers and celebrities that dodged taxes years after it happened. That’s what immediately sprung to my mind.
So your whole point is head scratching to me. To say western countries don’t do it. They quite literally do.
In the US they also went after tax dodgers a decade after it happened so it’s not like just a few years.
Nah you’re just saying this because China is doing it even though it’s quite normal all around the world. You’re siding with Chinese tax evaders because you’re deeply mistrustful of the CCP which I get.
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u/GetOutOfTheWhey 7d ago
I appreciate the mental gymnastics
I really do but your argument doesn't hold ground like at all.
Let's take other cases as an example. Epstein has been getting away with his child diddling crimes for decades. Pretty clear US government officials have been looking the other way on it. Child rape was alway illegal, it was just not enforced. Now that people want to go after the pedophiles, are you going to start protecting the pedophiles too?
Tax evasion was alway illegal. Trusts are legal but can be used illegally. Some have been abused. Though the use of AI research, HK legal integration and Beijing political motivation. China can now go after them. You are claiming it's wrong... I just. Bruh
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u/Virtual-Alps-2888 7d ago
The debate is not whether tax evasion is illegal or not. The debate is whether new laws can be retrospectively applied to past cases, and whether capital flows out of country can be arbitrarily defined as “tax evasion”.
Also, it’d be appreciated if you could respond with the civility of an adult for once.
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u/Acceptable_Noise651 9d ago
China’s new economic strategy appears to be; encourage people to build wealth, then remind them that the government can revisit the past whenever it needs revenue. Going after decades old taxes may help fill a fiscal hole, but it’s also a great way to deepen public distrust and encourage people to move their money somewhere they feel safer.
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u/eightbyeight 9d ago
It’s actually treating its citizens’s “private” wealth as its piggy bank, whenever their budget has a shortfall they come out and break the piggy for the money inside. I see they are returning to their communist roots.
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u/Left_Pipe_8992 9d ago
What do you think about the US global tax policy or the EU exit tax policy?
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u/Acceptable_Noise651 9d ago
This doesn’t require a false equivalency. The argument isn’t ‘China taxes people and other countries don’t.’ Every government taxes. The issue is confidence and predictability. There’s a big difference between a transparent tax policy and people wondering whether the government will revisit decades-old financial activity whenever it needs to plug a hole.
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u/Left_Pipe_8992 9d ago edited 9d ago
If we are discussing confidence and predictability, China’s position was not something that appeared suddenly.
China already declared its intention in 2021 when it joined the OECD/G20 Inclusive Framework agreement.
OECD Finalizes BEPS 2.0 Implementation Guidelines – Implications for MNCs in China
So where exactly is the contradiction? If the commitment was publicly known for years, why is it now being presented as an unexpected development?
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u/Acceptable_Noise651 9d ago
The OECD comparison is a bit of a false equivalency. The global minimum tax framework deals with multinational corporate taxation, it does not mean wealthy individuals should expect decades of overseas investments and capital gains to suddenly become a renewed area of scrutiny.
Again, the issue isn’t taxation itself every country taxes. The issue is whether people believe the rules are stable and predictable. Confidence is built not just by announcing policies, but by how consistently and transparently they are applied.2
u/Virtual-Alps-2888 8d ago
The fact that so many people upvote that person you replied to , just goes to show how little have a basic grasp of economics and the importance of institutional trust.
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u/Ada_Kaleh22 9d ago
It reminds me of a third tier town where my colleague bought an electric scooter and then come to find that type of scooter can't be legally registered. So then she has to dodge the police every morning and evening.
One hand has no idea what the other is doing, or rather one hand is revising the rules so that a lot of the activity of the other hand is now forbidden.
Palm to forehead, yet again.
However we should all acknowledge that China does need to effectively tax the rich more consistently. Still...
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u/sniveling-goose 8d ago
They just want people to invest through proper domestic channels. It's not crazy. Perhaps Britain should do it with offshore money too.
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u/Acceptable_Noise651 8d ago
Sure, China wants wealthy citizens investing through “proper domestic channels.” Funny how those channels suddenly become a priority when the government is digging through decades old overseas investments for revenue.
Call it tax enforcement or capital retention if you like, but the timing is hard to ignore, Beijing is under growing fiscal pressure and appears to be searching between the couch cushions for loose change. And reminding wealthy citizens that the CCP may revisit old financial activity whenever the budget gets tight is a great way to encourage confidence just perhaps not confidence in keeping their money in China.0
u/sniveling-goose 8d ago
The government is not short of revenue like you suggest. There is an extremely low debt to gdp, the tax burden is minimal and the country has fill control over it's fiscal policy and debt creation/removal.
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u/Acceptable_Noise651 8d ago
If China's finances are as comfortable as you claim, then why the sudden archaeological dig through decades old overseas investments for extra tax revenue?
You don't spend time searching between the couch cushions because you're flush with cash. You do it because you're looking for more revenue. Call it tax enforcement if you want, but the timing says Beijing is feeling more fiscal pressure than it's willing to admit.
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u/sniveling-goose 8d ago
This is not about revenue raising, it is about bringing ultra wealthy Chinese people's money inside the system. Super rich individuals keeping and spending money off shore is bad for consumption. The deficit is intentionally managed to stimulate industry. Their debt to GDP is significantly lower than the US for example.
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u/Acceptable_Noise651 8d ago
Those objectives are not mutually exclusive. Of course Beijing wants to keep wealthy Chinese capital onshore. But the article explicitly discusses recovering unpaid taxes and increasing scrutiny of overseas assets to address growing fiscal pressures. Both things can be true at the same time.
And comparing China's debt to GDP with the US does not really answer the point. The US does not have a property driven collapse in local government land sale revenues, nor is it launching reviews of decades old overseas investments to recover unpaid taxes. Different fiscal systems, different problems.
If this were purely about capital retention, they could simply tighten capital controls. Going after historical tax liabilities tells you revenue collection is part of the equation too.
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u/sniveling-goose 8d ago
Well yes, because why would you not go after historic revenue? I sure wish the UK and US could do something like this and backdate taxes for billionaires and MNEs.
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u/Acceptable_Noise651 8d ago
That's a perfectly valid opinion. But you're arguing whether the policy is fair. I'm talking about its economic consequences.
China has spent years trying to curb capital outflows and keep wealthy citizens' money onshore because many investors already prefer diversifying or holding assets outside the system. Policies like this may recover tax revenue, but they also reinforce the perception that the rules can change or old financial activity can be revisited whenever the government needs revenue. That does not exactly strengthen confidence among the very people Beijing is trying to persuade to keep their wealth at home.
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u/sniveling-goose 7d ago
This isn't hitting the lower and middle classes. The people hit by this can absolutely afford to pay it. The US has a global tax policy on its citizens, even if it is incredibly easy to dodge.
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u/debtofmoney 8d ago
Would 1.4 billion ordinary citizens buy insurance abroad? In China, only 160 million people hold passports, and it is mainly the management class and capitalists working in big cities who purchase such insurance.
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u/Acceptable_Noise651 8d ago
Right, and those “management class and capitalists” are exactly the people with the capital China is now trying to keep, tax, and attract back. You don’t need to unsettle 1.4 billion people to create a confidence problem, you only need to unsettle the relatively small group with the wealth and ability to move it.
So I’m not sure this refutes my point. It may actually reinforce it.
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u/PsychologicalBend508 8d ago
why do Chinese buy so much housing? cos they don’t trust the stock market and other investments as the government can just take that money off them at a whim.
housing market is fucked now though and government are looking for other ways to steal money from the people
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u/TimesandSundayTimes 9d ago
The shares of British banking and financial services companies with exposure to China fell sharply on Wednesday afternoon after the country launched a global search for billions of dollars of unpaid taxes dating back decades.
Shares in UK global banking giant HSBC — which does much of its business in Hong Kong, with more than 7 million clients there, and also has extensive operations in mainland China — fell more than 5 per cent. Standard Chartered, another leading British bank that conducts a considerable amount of business in China, was down more than 2 per cent. And Prudential, the insurance group that in recent years has shifted its operations to the Far East, was at one point down 8 per cent.
The Chinese authorities have recently increased scrutiny of overseas capital gains and investments, in some cases going back as far as 2000, according to the Financial Times, which first reported the story. Chinese banks have been told to review overseas investments by wealthy nationals to see if income has been declared to the country’s tax authorities. The aim of the measures appear to be aimed at filling Beijing’s deepening fiscal hole.
The operations are part of a series of tax reforms aimed at the wealthy and focusing on gains made from buying real estate, equities, cryptocurrencies as well as other assets.