Mogul’s tax 'excuses' rejected

By Li Qiaoyi Source:Global Times Published: 2013-11-25 23:33:01

Potential home buyers look at a housing model in Ningbo, East China's Zhejiang Province.  
Photo: CFP

Potential home buyers look at a housing model in Ningbo, East China's Zhejiang Province. Photo: CFP



Property mogul Ren Zhiqiang's rebuttal of a China Central Television (CCTV) report revealing a huge amount of unpaid land appreciation tax (LAT) by major real estate firms was rejected Monday by the lawyer who calculated the unpaid taxes.

"Ren's arguments are nothing but bad excuses used by property developers to blindfold the public," Li Jinsong, a Beijing-based lawyer and certified tax agent, told the Global Times on Monday.

Li, who previously worked for tax authorities in East China's Jiangxi Province for over 10 years, found that 45 major listed property companies in the country had failed to pay 3.8 trillion yuan ($623.58 billion) in LAT between 2005 and 2012. Li said his calculations were based on official data.

The findings were initially released in May, he told the Global Times. But it was not until Sunday when the national broadcaster aired the report that the issue drew widespread attention.

Ren Zhiqiang is the chairman of Huayuan Property, which is one of the 45 companies named in the report. He said on his Weibo account soon after the CCTV report that the allegations were "silly and ignorant."

In a series of Weibo posts, Ren argued that property companies prepay part of the LAT when pre-selling homes, while the remaining payment depends on the project's progress.

The remaining payments can be delayed if property companies have yet to meet the settlement conditions, Ren said.

"It's neither disobeying the taxation law nor falling into arrears," he wrote.

Ren also stated on his Weibo on Monday morning that he is considering legal action against CCTV.

Several other property companies mentioned in the CCTV report issued their response on Monday.

China Vanke Co, which reportedly owed 5.8 billion yuan by the end of 2012, the third-highest debt on the list, told news portal sina.com.cn Monday that the report confused the accounting term accrued expense with current tax liability.

Overseas Chinese Town and China Merchants Property also emphasized Monday that the situation is an industry-wide convention.

Some other companies have yet to respond to the report.

Agile Property Holdings, which reportedly owes the most at 8.3 billion yuan, said the company could not give an immediate comment when reached by the Global Times Monday.

R&F Properties, fourth on the list at 5.8 billion yuan, also refused to comment when reached by the Global Times Monday.

"A delayed LAT payment is not the same as disobedience of the tax law, but if the non-payment happens when the settlement conditions have already been met by property companies, that would be a violation of the rules," Zhu Weiqun, a professor at Shanghai University of Finance and Economics, told the Global Times Monday.

Li, the lawyer, called for more transparency from the country's taxation authorities and on Monday publicized an information disclosure application submitted to the State Administration of Taxation (SAT), asking for details about the settlement conditions for housing projects in nine cites including Beijing and Shanghai.

Some Web users called on the SAT to respond to the report. A netizen identified as Weijiji said Monday on his Weibo that the SAT has failed to deal with the situation properly, and asked whether the property firms will even be required to pay the tax.

Efforts by the Global Times to reach the SAT for comment since Sunday were not successful.

The national broadcaster had acquired some information from the SAT before the program, but the administration knew nothing about the report, information portal aastock.com reported Monday, citing an unnamed SAT official.

"[I] noticed several Shenzhen-based major real estate companies were mentioned by CCTV, [but the report] made a mistake," Yang Long, deputy director of the Administration of Local Taxation of Shenzhen, was quoted as saying Monday by 21cbh.com.

Yang Hongxu, vice president of Shanghai-based E-house China R&D Institute, said on his Weibo that the report might hurt the property sector, as developers will see their profits fall if the government toughens up on collection of LAT.

But a Fitch Ratings statement released Monday downplayed the impact, saying the delayed payment is "normal and consistent in China," and is "not a concern for ratings issuers."

Shares in property firms saw mixed performance Monday, with Hong Kong-listed Agile Property Holdings falling 2.57 percent. But Ren's company edged up 1.89 percent on the Shanghai Stock Exchange.

Yang Jing contributed to this story



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