The State Taxation Administration. Photo: VCG

The State Taxation Administration (STA) on Monday revealed two tax evasion cases in China's "new three" industries — new-energy vehicles (NEVs), lithium-ion batteries and photovoltaic products — marking the first public disclosure of such violations in these sectors, according to the Xinhua News Agency.

In East China's Jiangxi Province, Nanshi Lithium Battery New Materials Co was found to have falsely classified 6.68 million yuan ($920,000) in wages for non-research and development (R&D) staff as research expenses between 2021 and 2023, illegally claiming additional tax deductions. Authorities ordered the company to repay 5.72 million yuan in back taxes and penalties, plus late fees, according to Xinhua. 

In Shenzhen, South China's Guangdong Province, between 2019 and 2022, a criminal group manipulated 11 new-energy firms to issue fake invoices and disguise lead-acid batteries as lithium batteries for export, fraudulently securing 149 million yuan in export rebates. In April 2025, the group leader was sentenced to 12 and a half years in prison and fined 70 million yuan, while 18 others involved received prison terms ranging from three to 11 and a half years, Xinhua reported.

The tax authorities have ordered enterprises that illegally claimed additional deductions for R&D expenses to repay taxes and fines in accordance with the law, along with late payment surcharges. In the other case, the local court has already heard the matter and issued a ruling, with the individuals involved held legally accountable and punished, Xinhua reported.

"In recent years, China has rolled out a series of tax incentives to support the rapid growth of the 'new three' industries," an official of the STA said. "Yet some enterprises in these sectors, despite already enjoying relatively light tax burdens, have still sought to exploit the preferential policies through fraudulent claims or outright evasion," an official with the STA was quoted by Xinhua as saying. 

Such practices undermine the policy's original purpose of spurring innovation, distort a fair tax environment, fuel cutthroat low-price competition, exacerbate overcapacity, and hinder the building of a unified national market, the official said.

Bian Yongzu, executive deputy editor-in-chief of Modernization of Management magazine, told the Global Times on Monday that China's preferential tax and rebate policies for emerging industries have effectively fueled rapid growth, but they are also exploited by a few companies. Such misconduct not only undermines the intended purpose of incentivizing innovation but also brings negative spillover effects to the broader industry.

Bian pointed out that the majority of firms pay taxes lawfully, and those that evade taxes through loopholes gain an unfair advantage, distorting competition. This damages the principle of fairness in the business environment and forces compliant enterprises into a disadvantaged position, which in turn weakens overall market vitality. "Strict enforcement and tough penalties are essential to deter violations and foster a healthy, rules-based business ecosystem where all firms compete on an equal footing," he said.

Tax authorities will rigorously implement various preferential tax and fee policies to support the growth and development of business entities, and will also continue to rigorously investigating and punishing illegal activities that undermine market order at the expense of tax fairness, and resolutely maintaining a fair and lawful tax environment, the STA official said, according to Xinhua. 

Global Times