A number of real estate developers in China are failing to report actual profits in a bid to pay less tax, according to a Ministry of Finance investigation.
The ministry has investigated 39 real estate companies involved in 133 development projects around the country since 2005. It found that most of these companies manipulated profit margins in their accounts, according to a China Central Television (CCTV) report on Friday.
"Some companies did it in a very serious way," Geng Hong, director of the ministry's monitoring and investigation department, told CCTV. The average profit rate of the 39 companies was 12.22 percent, but after investigators began examining their accounts, they discovered the average rate was in fact 26.79 percent.
"One of the companies even had a profit rate of 57 percent but it never reported the figure," Geng said.
Despite the results of the investigation, it would be unfair to tar all real estate developers with the same brush, Geng noted. She vowed that her ministry was ready to get to the root of the problem.
"We will soon choose another pool of companies to investigate," she warned. "I believe the public is very concerned about it."
Companies caught cooking the books will have to rectify their accounts and pay the full tax amount. Serious offenders will be taken to court, she added.
(China Daily November 13, 2006)