Alibaba warns most internet companies will likely no longer enjoy the 10% preferential tax rate as China continues to rein in the sector
Rental bicycles parked in front of the mascot for the Taobao e-commerce platform near the Alibaba headquarters in Hangzhou, China, on August 2 2021. Picture: QILAI SHE/BLOOMBERG
The move reflects Beijing’s tightening regulatory approach towards its largest tech companies from Alibaba to Tencent Holdings and Meituan, which have come under fire for using their troves of data to enrich investors at the expense of users. On Thursday, the state-backed newspaper Securities Times argued in an op-ed that China should scrap tax breaks to gaming companies because now they are big enough to thrive on their own.
China’s effort to free up more tax revenue reflects a global trend. A tax deal struck between the world’s richest countries this year brought global governments a step closer towards clawing back some power from technology giants that have used century-old regimes to build up wealth eclipsing the economies of most nations.
The loss of the preferential tax status at its core marketplaces like Taobao and Tmall could mean Alibaba will miss out on a tax benefit of roughly 11-billion yuan for this fiscal year, Bocom analyst Connie Gu estimated. “But Alibaba has a diversified business portfolio,” she said. “It can still apply for tax reduction in the following years and also for other units like cloud, when they get profitable.
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