Drinks magnate probed over tax
By Wang Zhenghua
Updated: 2008-04-15 07:36

SHANGHAI: Billionaire beverage entrepreneur Zong Qinghou is being investigated for allegedly evading some 300 million yuan ($42.9 million) in taxes.

The tax department of Hangzhou, Zhejiang province, the home base of beverage giant Wahaha Group, launched the investigation of the company's chairman after receiving a tip-off that he might have avoided paying personal income taxes over the past decade, Caijing magazine reported yesterday.

The probe, which started in August, has made substantial progress and is nearly finished, the report said.

The State Administration of Taxation and the Hangzhou taxation bureau are discussing how to deal with the allegedly overdue tax payment.

The Caijing report said the entrepreneur had paid more than 200 million yuan in arrears taxes in October, after the investigation kicked off, but still owes millions more.

Both Zong and the Wahaha Group's spokesperson declined to comment yesterday, while a press officer of the State Administration of Taxation said he was not aware of the issue.

People found guilty of evading more than 100,000 yuan worth of taxes - if that amount comes to more than 30 percent of their total tax bill - could face up to seven years in prison and fines of up to five times the value of the unpaid taxes.

Zong, a 63-year-old native of Zhejiang, was China's 23rd-richest man and the world's 840th richest last year, according to Forbes magazine last year.

His Wahaha Group, the nation's largest beverage maker, formed a partnership with French food and dairy giant Danone Groupe SA in 1996, but last year the pair became embroiled in a dispute over the ownership of the Wahaha brand and other businesses not included in the joint venture.

They are still searching for a solution.

Danone, which has 39 joint ventures with Wahaha, paid Zong $71 million in service fees and share dividends between 1996 and 2006, Caijing reported, citing bank transactions between Danone and Zong.

The money was delivered to the Hong Kong-registered accounts of Zong; his wife, Shi Youzhen; his daughter, Zong Fuli; and the former Party secretary of Wahaha, Du Jianying - all at the entrepreneur's request, the magazine said.

In a public letter delivered after Wahaha and Danone's dispute was exposed, Zong claimed he was the "cheapest CEO in history" after earning a salary of 3,000 euros ($4,700), 100,000 euros worth of annual allowances and a bonus worth 1 percent of the annual profit of the joint ventures.

That amounted to about 70 million yuan of income every year.

"The investigation showed that he earned far more than this and hasn't fully reported the tax for years," the magazine cited an investigator as saying.

(China Daily 04/15/2008 page5)