As China’s long-running property downturn continues to erode a key source of local government funding, business owners and tax professionals say the regime is increasingly turning to tax audits, back-tax collections, fines, and other nontax revenues to fill growing budget gaps.

Several entrepreneurs and a Chinese regime insider interviewed by The Epoch Times said tax authorities have intensified reviews of companies’ historical records this year, scrutinizing invoices, financial transactions, payroll records, and tax filings dating back several years. Some analysts estimate that local governments may have already collected billions of yuan through retrospective tax investigations and related enforcement measures. They spoke on condition of anonymity or only publishing their surnames out of fear of reprisal.

The trend comes as China’s traditional “land finance” model—a system under which local governments relied heavily on revenue from land sales to property developers—continues to weaken.

Official data released by China’s Ministry of Finance on May 20 showed that general public budget revenue rose 3.5 percent year over year during the first four months of 2026. Nontax revenue, however, increased by 13 percent.

At the same time, the regime’s fund revenue, which includes proceeds from land sales, fell sharply. Revenue from state-owned land-use rights transfers totaled 680.1 billion yuan ($100.5 billion) between January and April, down 27.2 percent from a year earlier. Local government fund revenue declined 22.1 percent during the same period.

An insider from within the Chinese Communist Party (CCP) told The Epoch Times the figures suggest that local governments are not simply facing declining revenue but are undergoing a significant shift in how they generate income.

“Land-sale revenue continues to shrink, so local governments are increasingly relying on tax inspections, back-tax collections, penalties, asset confiscations, and other nontax sources to make up the shortfall,” the insider said.

According to the insider, the full scale of additional revenue generated through tax enforcement is not publicly disclosed, but could already amount to several billion yuan nationwide.

“Retrospective audits and tax recoveries produce results quickly,” he said. “Once local governments see the financial benefits, it becomes difficult to stop.”

Increased Scrutiny

Entrepreneurs in several provinces told The Epoch Times that tax investigations have become a growing concern amid an already challenging economic environment.

A private business owner in Jiangxi Province, surnamed Liu, told The Epoch Times that Chinese tax authorities are examining company records going back as far as five years.

“The economy is already weak, and many companies are struggling to find orders,” Liu said. “At a time like this, expanding tax inspections looks like an effort to increase government revenue.”

He warned that aggressive enforcement could push financially vulnerable firms out of business.

“If companies shut down, the regime won’t be able to collect taxes from them in the future either,” he said.

Chinese tax authorities have publicly signaled increased attention to tax compliance.

On April 24, China’s State Taxation Administration published guidance emphasizing that invoices, contracts, financial transactions, and underlying business activities must be consistent and supported by genuine commercial activity, according to state media Xinhua News Agency.

In February, the Tianjin Tax Bureau announced its 2026 audit and inspection plan covering corporate taxpayers, noncorporate taxpayers, and withholding agents.

The regime has also highlighted several tax-evasion cases involving the use of personal bank accounts to receive business payments.

On May 22, tax officials publicized eight tax-evasion cases, according to Xinhua News Agency. Some investigations traced transactions back to 2019 and 2020.

Separately, Beijing tax authorities announced on May 7 that a technology company had been assessed nearly 12 million yuan ($1.77 million) in taxes, penalties, and late fees for allegedly understating income, improperly claiming expenses, and failing to fulfill certain payroll tax obligations, according to state media China Central Television.

Overseas Moves Draw Attention

Some business owners say firms that have shifted production overseas are also drawing increased scrutiny.

A manufacturing entrepreneur in Zhejiang Province told The Epoch Times that many Chinese companies have relocated factories to countries such as Vietnam and India in recent years because of rising costs and weakening domestic conditions.

“The biggest fear now is having old accounts reopened,” he said. “I’ve heard that some companies that moved factories overseas are also being closely examined.”

According to the entrepreneur, Chinese tax authorities are reviewing invoices, banking records, and social insurance contributions as part of broader investigations.

Several business managers told The Epoch Times that enforcement efforts appeared to intensify around March and April.

Some said the reviews are not necessarily conducted under a single nationwide campaign. Instead, scrutiny can emerge through multiple channels, including tax audits, business deregistration procedures, social insurance compliance checks, invoice verification programs, adjustments to tax assessments for self-employed operators, and market-regulation penalties.

Practices that became common during difficult economic years—including incomplete bookkeeping, underpayment of social insurance contributions, and receiving business income through personal accounts—are increasingly becoming targets of renewed enforcement.

Fiscal Pressures Spread 

China’s Ministry of Finance reported in April that nontax revenue reached 1.31 trillion yuan during the first quarter of 2026, up 2.9 percent from a year earlier.

Officials attributed part of the increase to local governments generating more income from state-owned assets, including property sales, leases, and other asset-management activities.

Business owners interviewed by The Epoch Times argued that the growing emphasis on tax enforcement reflects a broader shift in how local governments are responding to fiscal stress.

For decades, many local governments relied heavily on land sales and property development to support spending. As the real-estate sector contracts and land revenues decline, the regime is increasingly seeking revenue from businesses, self-employed entrepreneurs, administrative penalties, and other nontax sources.

Wang Yibo contributed to this report.