Tax hike may endanger Alibaba profits

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Alibaba and other major Chinese internet companies are in danger of losing their advantageous tax rates. After the quarterly figures Alibaba presented earlier this week, the internet giant would have indicated in conversations with some investors that it expects to pay more tax as Beijing tightens the rules for internet companies.

To date, Alibaba was able to use its status as a Key Software Enterprise for some of its operations, which meant that it only had to pay 10 percent tax.

Chinese companies normally pay 25 percent corporate tax, but high-tech companies only have to pay 15 percent or even 10 percent if they qualify as Key Software Enterprise.

According to the news agency, Alibaba expects to pay 20 percent tax this current quarter, whereas last year it was only 8 percent.

And Alibaba would have indicated that many internet companies will face such tax increases.

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Nicholas de Kramer

Nicholas de Krammer, а self-taught economic analytic with heave mathematical background. Math behind the economics (and economics behind math) is the strong side of the author. Contact him at [email protected]

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