Image credit: Alan Cleaver.
In what cannot be a good sign of economic stability, the provincial governments of Jiangsu and Zhejiang have begun demanding companies pay their 2013 tax bill over a year early, according to local media.
Responding to a much forwarded report by the Xiaoxiang Morning Post about Zhejiang officials requesting 2013 taxes at the end of October, Ye Tan, an economics and finance commentator, wrote that the practice was not confined to that province (translation by Tea Leaf Nation):
I just received a call from a friend who is an entrepreneur in Northeastern China. He said that local officials were collecting taxes for 2013. If companies refused to pay, officials would look up account books [and find an excuse to fine them].
Other Weibo users chimed in to report that Jiangsu officials were also demanding early tax payments.
Yueran Zhang explains the reasoning behind the move:
By pre-collecting taxes, the government is trying to offset a decrease in revenues. The growth rate of public revenues on a year-on-year basis was “only” 10.9% during the first three quarters of 2012, compared to 22.4% in the same period in 2010 and 29.5% in the same period in 2011. Although the growth of public revenues still far exceeds those of GDP and per capita income, many local governments have opted not to adopt austerity policies to rationalize their balance sheets, instead desperately searching for more revenue to cover their spending.