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China punishes pro-Taiwan entrepreneurs with tax investigation
Gao Jiahe
7/15/2004

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TAIPEI - The political environment is tightening. The People’s Daily “called the roll” on pro-Green Taiwanese entrepreneurs.

The Office of the Chinese National Taiwanese Association stated explicitly that they do not welcome pro-Green* Taiwanese entrepreneurs to invest in China. Quite a few Taiwanese entrepreneurs expressed privately that now the situation is much tighter than the days during the presidential general election in 2000 when the government was already very strict with tax and factory investigations. The situation for the pro-Green Taiwanese entrepreneurs may be described as dangerous. During the sensitive days around the presidential general election, most of the pro-Green entrepreneurs postponed their trips to China to avoid imprisonment.

The owner of a company with listed stocks said that in order to attract entrepreneurs and investments, China would implement all kinds of excellent tax deduction programs. However, once the political atmosphere changed, under the order of the government, the staff members from all levels of the tax departments work together. They [entrepreneurs] not only have to face the danger of investigation, but also betrayal by local employees. In China, tax evasion can be serious or trivial. The most severe case can result in life imprisonment.

Gao Weibang, the director of the Association of Victimized Taiwanese Investors in China, said that at present it is estimated that there are nearly 1,000 Taiwanese entrepreneurs in China imprisoned for tax evasion. And China is increasing tax investigations this year. Dong Yuan, Shenzhen and regions in southeastern China have quite a few Taiwanese entrepreneurs who have committed crimes through tax evasion. Many Taiwanese-run consulting companies don’t want to accept these entrepreneurs’ cases because they know they cannot win even with lawsuits.

A member from the Taiwanese Entrepreneurs Association in Zhangzhou said that now the political atmosphere is much more severe as compared to the period of the 2000 presidential general election, because of the tough talk from the Office of the National Taiwanese Entrepreneurs Association a while back, as well as being specifically named by People’s Daily, China’s key government media. There is no doubt that a large-scale investigation of factories and taxable income is unavoidable. While implementation of the rule of law in tax investigation was once considerably loose, it is going to become increasingly strict.

With unstable taxable income and a suspicion of local workers, a Taiwanese businessman who produces bicycles said that even if Taiwanese entrepreneurs are honest and pay the tax, if targeted by a certain government department, once the tax investigation begins, the company has to shutdown for a few days. They have to rummage through boxes and chests to check for the account books, and investigate the merchandise. How can they continue doing business?

The business owner said that the most frightening thing is that Taiwanese entrepreneurs not only have to deal with tax officers, but also have to watch out for betrayals by native Chinese employees. There are so-called “hotlines” in each tax office and police department in every province and city in China. These offices offer rich and generous bonuses and encourage insiders to report on such things as how many cars Taiwanese businessmen have, or whether they have construction projects and on how many homes - even on things like whether they have extramarital affairs without the knowledge of their wives back in Taiwan. The tax offices know all these details. Therefore, some Taiwanese entrepreneurs decide to keep a simple account book in the local dialect and a detailed account in Taiwanese.

Xu Wenlong from Chi Mei was labeled by the People’s Daily as an unwelcome Taiwanese enterpriser. This prompted the pro-Green Taiwanese entrepreneurs to keep a low profile. Publicly, they will not discuss politics related to the Taiwan Straits. There were some Taiwanese entrepreneurs who maintained a firm position in their pro-Green attitude and ended up in intense tax investigations. Some of those entrepreneurs plan to shut down their businesses.

Gao Weibang said that, regardless of their political positions, the fact is Taiwanese entrepreneurs in China will always be in danger of tax investigations. China is not a place they plan to stay for the long term. They will leave when they have to.

“During the presidential general election, Taiwanese entrepreneurs would not talk publicly about the Green or Blue, though most of them are pro-Green, ” commented a Taiwanese entrepreneur in Shanghai. He is engaged in the frozen foods business said that during the presidential general election, almost all Taiwanese entrepreneurs would say publicly that they were pro-Blue. Of those Taiwanese entrepreneurs who would avoid talking politics in public, nearly all of them are pro-Green, because there is a saying, “Under another’s roof, one has to lower one’s head.”

Trouble Comes When The Tax Officer Knocks On Your Door

The chairman of a Taiwanese investment association said that before, when a temporary management law [for a Taiwan investment and enterprise association] was passed last April in China, the so-called guidance towards Taiwanese investment associations was only dealt with in private. Now, it is quite public. Besides requesting the chairman and vice-chairman to observe the [one China] policy, they are asked them uphold the position of China’s [reunification]. None of the Taiwanese entrepreneurs dare to talk about being independent or pro-Green or pro-Blue.

A Taiwanese entrepreneur in Wuxi who produces car transmission systems had encountered a groundless tax investigation a while ago. It was only because of his pro-Green position. After he encouraged relatives and friends to step out and support the exposure of the news on 228 Taiwanese protection, he was specifically mentioned by the Chinese government as supporting Chen Shui bian.

This Taiwanese entrepreneur continued to say that there are quite a few people in the Office of the Chinese National Taiwanese Association who work daily in clipping news article, browsing the internet, and watching satellite TV to collect all kinds of Taiwan news. If he dares to say something in China, or even say something in Taiwan, he may also face the danger of being targeted by the Chinese government. If the situation continues to get worse, he plans to withdraw all his investments and shut down his factory in Wuxi.

Gao Weibang said China announced it does not welcome Taiwanese entrepreneurs who support Taiwan’s independence to come to China to make money. But, has China considered how much of the huge foreign exchange income in China is generated by Taiwanese enterprises? The fact is the great number of job opportunities the Taiwanese entrepreneurs created in China have made it possible to stabilize the economy even though there is a huge unemployment problem throughout China.

Editor’s Note: Pro-Green refers to entities that are close to the Democratic Progressive Party, the current ruling party of Taiwan. Pro-Blue refers to entities that are affiliated with the Kuomintang, the ruling party from 1950's to 2000.

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