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China’s recent tax reporting regulations for internet platforms mark a significant shift in the industry, targeting practices like income concealment and reclassification that have traditionally been used to evade taxes. This move paves the way for a compliance-focused transformation within the sector, experts say.
The State Council unveiled the new rules on June 20, and they went into effect immediately. Under these regulations, major e-commerce and live-streaming platforms—including Taobao, JD.com, Douyin, and Kuaishou—must now report operator and practitioner identity and income data on a quarterly basis.
Regulatory impact is already visible. Many online store operators across various regions reported receiving text messages from tax authorities, prompting them to complete information disclosures and conduct self-inspections and past tax declarations. Some practitioners have shared screenshots of these messages on social media platforms.
The regulations are expected to heavily impact lower-priced, lower-quality merchants, especially those relying on tax evasion to reduce costs. As compliance expenses rise, these businesses will struggle to stay competitive and will gradually exit the market, according to Hong Tao, head of the Institute of Commercial Economics at Beijing Technology and Business University.
More than 90 percent of the businesses operating on these platforms are small and micro enterprises with monthly sales below CNY100,000 (approximately USD14,068). Currently, they pay little or no taxes under existing preferential policies. Experts say the new rules primarily enforce standardization of tax declarations without increasing their overall tax burden.
“The essence of these regulations is to enforce lawful taxation on hidden income, not to impose extra taxes on businesses,” stated Sun Kunpeng, an associate professor at the School of Public Finance and Taxation at Central University of Finance and Economics. This change aims to curb unfair cost advantages gained through tax evasion, thereby shifting competition toward product quality, service experience, and innovative business models. It also promotes a fairer environment for compliant operators.
This shift will matter beyond just taxes. It’s expected to elevate online consumption from a focus on “low prices” to “quality,” fostering a healthier brand ecosystem and aiding the industry’s move from traffic-driven growth to value-driven development, Hong added.
A transparent, predictable tax environment can better mirror economic realities, support the efficient planning and regulation of financial policies, and improve resource allocation throughout society, Sun emphasized.
Last year, China’s online retail sales reached CNY15.5 trillion (about USD2.18 trillion), a 7 percent increase over the previous year. Live-streaming e-commerce alone accounted for over CNY4.5 trillion (approximately USD633.1 billion), contributing 80 percent of the total growth in online retail. However, many top live-streamers and large merchants have set up multiple self-employed entities to split income, leveraging small-scale taxpayer policies that offer tax reductions.
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