Why are mainland China’s tax officials suddenly so interested in my Hong Kong MPF?

For the past few months, this newspaper has been extensively covering China's crackdown on tax avoidance, particularly its focus on taxing the income of wealthy individuals held in offshore trusts. However, there have been recent indications that Chinese tax officials are beginning to show interest in the incomes of ordinary citizens, including journalists.

First, a colleague in the South China Morning Post's Beijing bureau received a text message from the city's tax service, reminding them to declare any offshore trust holdings and complete the necessary tax declaration and payments. Then, at the end of last month, I received a phone call from Shanghai's municipal tax bureau, which expressed interest in Hong Kong's Mandatory Provident Fund (MPF), the city's compulsory retirement savings scheme.

The caller explained that the MPF was being categorized as an "offshore trust" and requested information about my mainland China tax payments and contributions to my MPF account in Hong Kong.

I explained to the official that the MPF is a de facto pension fund mandated by Hong Kong law for all wage earners, and it is unusual for mainland tax officials to label it as an "offshore trust". I emphasized that it would be completely unreasonable for mainland tax authorities to tax such a pension and retirement savings fund.

The official apologized for the abrupt call and reassured me that it was part of their routine work collecting and updating records. She agreed that pension funds like the MPF should be spared from taxation and said she would relay my suggestions to her supervisors.

In addition, I pointed out that this policy could potentially affect Shanghai's ability to attract global talent. As the financial hub of mainland China, many individuals from Hong Kong and abroad work in Shanghai, and they might reconsider relocating if their offshore savings and pensions were to be taxed. The official acknowledged this concern and stated that it was simply a "canvassing" effort to gauge public opinion.

Beijing has been tightening its tax enforcement policies in recent years, introducing new measures to collect taxes on overseas income and assets such as offshore trusts, insurance policies, and overseas equity investments. The campaign aims to boost the finances of local governments, which have been strained by declining land sales and an economic slowdown affecting tax revenues.

While China has the right to collect taxes based on its laws, concerns have been raised that the campaign could lead to aggressive tax enforcement and unpredictable actions that may stifle economic growth at a time when confidence among consumers and businesses is crucial.