Why are mainland China’s tax officials suddenly so interested in my Hong Kong MPF?
For the past few months, this newspaper has extensively covered China’s ongoing clampdown on tax avoidance, especially its push to tax the income of super-rich families held in offshore trusts. We never expected to become targets of the campaign ourselves. But there have been signs in recent weeks that officials are starting to take an interest even in the incomes of South China Morning Post…
In recent months, the South China Morning Post has reported on China's crackdown on tax avoidance, particularly targeting offshore trusts held by super-rich families. Unexpectedly, journalists working for the paper have also become targets of the campaign. Several journalists, including one based in Beijing, have received messages from the city's tax service requesting information about offshore trust holdings.
Recently, a tax official from Shanghai's municipal tax bureau called to inquire about Hong Kong's Mandatory Provident Fund (MPF), the city's compulsory retirement savings scheme. The official explained that the MPF was categorized as an offshore trust, prompting her to request information about the author's mainland tax payments and MPF contributions.
The author clarified that the MPF is a mandatory pension fund under Hong Kong law and suggested that it would be inappropriate for mainland tax officials to label it as an offshore trust.
The official apologized for the abrupt call and reassured the author that it was merely part of their routine work updating records. However, the author emphasized the importance of clearly defining what constitutes an offshore trust, as people feel strongly that pension funds like the MPF should be exempt from taxation. The official promised to relay the author's suggestions to her supervisors, noting that the policy could impact Shanghai's ability to attract global talent.
China has been tightening its tax enforcement policies in recent years, with new measures targeting overseas income and assets such as offshore trusts, cross-border insurance policies, and overseas equity investments. The government aims to boost local government finances, which have been strained by a decline in land sales and a slowing economy.
The MPF tax classification came into effect in July, with a flat 20% tax applied at various stages of the trust's life cycle. While China has the right to collect taxes based on its laws, concerns have been raised about aggressive enforcement practices that could undermine economic vitality at a time when the country needs to boost consumer and business confidence.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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