The Ministry of commerce published lately a string of encouraging figures. In the first five months of this year China attracted a foreign capital of 25.9 billion dollars, a rise of 11 percent year-on-year; a number of 17,359 foreign-funded companies were set up, 14 percent higher than the previous year and the contractual value reached 57.2 billion dollars, a growth of nearly 50 percent. China has become a hot land of foreign capital.

However, behind these shining figures 55 percent companies with foreign investment are running in the red, while foreign capital keeps rushing in. Tax experts pointed out sharply that many companies are conducting tax avoidance under the cloak of "money-losing".

At least 30 billion yuan by tax avoidance annually

Tax workers have found that many foreign-funded companies are doing "losing" business. They buy material from their parent or related companies overseas at a high price, and after processing in China sell them back to related companies at a price much lower. In this way they transferred profits to related companies very conveniently, and along with the loss of profits are the national revenue.

China suffers an annual loss of at least 30 billion yuan due to tax avoidance by foreign-funded companies, an official from the State Taxation Administration estimated. But many people say the estimate is too conservative. In Fuzhou city alone the profits transferred by foreign businessmen exceeded 1 billion yuan with a loss of tax avenue around 100 million yuan, an expert said, while P&G in Guangzhou once avoided tax by 81.49 million yuan. In fact, we never know how much taxation on earth is lost.

By People's Daily Online