China’s Real Estate Meltdown Deepens: Massive Tax Evasion Claims Send Shockwaves

A view of Vanke’s headquarters in Shenzhen, Guangdong, China. The company is reportedly struggling due to allegations of tax evasion./Vanke’s website.

China’s property crisis, already deepened by the continuous bankruptcy of major developers, is expected to face another severe blow. The real estate market is likely to freeze further as it has been revealed that the implications of the massive tax evasion by Vanke, the largest real estate developer based in Shenzhen, Guangdong, are not just rumors.

If the report on tax evasion is true, the situation will become quite serious. The tax authorities will conduct an investigation targeting Vanke and the entire industry. If mishandled, there is no guarantee that the already unstable real estate industry will not suffer more devastating damage.

According to Beijing sources familiar with the real estate industry on the 21st, the rumor of Vanke’s tax evasion surfaced when Bairun Real Estate in Yantai, Shandong, a long-term partner of Vanke, reported it to the tax authorities. The period and amount of tax evasion seem to be quite specific. In the past ten years, Bairun Real Estate accused Vanke of having stolen more than 100 billion yuan (approximately 18.6 trillion won) in taxes.

Bairun Real Estate elaborated on Vanke’s various methods of tax evasion. The first method was concealing income. Inflating project costs was also an effective means for Vanke to reduce taxes. With these two strategies, Vanke was able to reduce both sales and net profit significantly. Naturally, taxes were reduced.

The Chinese tax authorities have not yet officially responded to the report and media reports of Bairun Real Estate. But there’s no reason to wait or ignore the reports. The investigation may have already begun privately. In Beijing, real estate businessman Zhou Liangmin said, “What is the tax authority supposed to do? There has been a report, so there is no reason not to investigate.” As the situation is not trivial, the investigation results are expected to be announced within a few months at the latest.

Of course, Vanke denies the allegations. They argue that the fact that Vanke’s Yantai branch paid 2.7 billion yuan in taxes over five years proves their innocence. Judging by the atmosphere, it seems that it will soon be revealed whether Vanke’s claim is true.

A document was sent by Bairun Real Estate in Yantai, Shandong, a partner of Vanke, to the local tax authorities. The fact of Vanke’s tax evasion is clearly stated./ Jingji Ribao (Economic Daily).