China's tax crackdown intensifies! 940 billion in capital outflows under scrutiny, tax arrears publicly disclosed in March

China is intensifying efforts to tax undeclared overseas assets to fill budget deficits. Big data investigations require self-reporting of offshore income from 2022 to 2024. In the first 11 months of 2025, hot money outflows reached 940 billion USD. Starting from March, those who fail to pay will be publicly exposed through media. PwC reports a fourfold increase in consultations, and AI technology makes tax enforcement more precise.

The Web of Big Data Tax Enforcement and the Self-Reporting Trap

China is stepping up efforts to tax large amounts of undeclared overseas assets of its citizens, attempting to bridge the ever-growing budget gap. This “web of networks” employs big data methods from local governments in Beijing, Shenzhen, and other regions to track down violators. They are increasingly requiring a broad population to self-report any offshore income from 2022 to 2024. This has triggered a surge of people seeking tax planning and wealth management advice, and many are anxious about how much they should honestly disclose.

Tom, who works at a tech company in Beijing, was contacted by local tax authorities last August. To his surprise, they asked him to calculate his own tax liability: a 20% tax on capital gains and dividends, plus late payment penalties. Ultimately, he paid over 100,000 RMB (about 14,000 USD) and transferred 2 million RMB previously parked in Hong Kong stocks through more “official” channels. However, he is still pondering how to handle his nearly 300,000 USD in US stock assets. Tom said, “This is just absurd. They have no idea what the actual amount should be.”

This self-reporting model shifts the burden of proof entirely onto taxpayers. According to informed sources, self-reporting, as a relatively mild and alternative approach to formal audits, has traditionally been used more for corporations rather than individuals with compliance issues. It is generally issued in the form of administrative directives, serving to urge rectification and issue compliance warnings. In contrast, the US encourages voluntary disclosure of any non-compliance to reduce the risk of criminal charges.

Jeff, a freelance investor in Hangzhou, said that he was mentally prepared when he received the notice from tax authorities last year. His friend in Shanghai had already been contacted earlier. The 40-year-old investor also calculated his owed taxes himself, paying about 20,000 RMB on US stock dividends and offshore deposit interest. While authorities are still trying to clarify the scope of overseas holdings, he does not expect their methods to become less precise. Jeff said, “If last year their tools were just a dull knife, this year it has become a sharpened blade.”

Three Major Tracking Methods in Big Data Tax Enforcement

CRS Information Sharing: Joined the Common Reporting Standard in 2018, enabling automatic exchange of account information among global financial institutions.

Cross-Border Fund Flow Monitoring: Comprehensive tracking of cross-border transactions via banks, Alipay, WeChat, and other channels.

AI Data Comparison: Logical comparison of property, vehicles, children’s education expenses, and declared income.

According to a document seen by Bloomberg, investors are now required to detail their overseas income and financial investments, calculate the taxes owed from 2022 to 2024, and assume legal responsibility for the self-reported information submitted to tax authorities. Those who fail to pay on time will face greater pressure in March: a new regulation will come into effect, allowing relevant departments to publicly expose tax delinquents through media and other channels.

Social Pressure and Retroactive Risks of Public Exposure in March

Those who do not pay their taxes on time will face increased pressure in March: a new regulation will allow authorities to publicly expose tax delinquents through media and other channels. This threat of “social death” has a strong deterrent effect in Chinese society. Once names and owed amounts are made public, it can not only damage personal reputation but also affect career development, children’s education, business cooperation, and more.

The scale of overseas investments is difficult to quantify. An index compiled by Bloomberg industry research indicates that, in the first 11 months of 2025 alone, the outflow of “hot money” is estimated at 940 billion USD. This trend is expected to make 2025 the second-largest year for annual outflows since statistics began in 2006. Behind this enormous figure, it is currently impossible to precisely determine how much is legal investment, how much is asset transfer, and how much involves tax evasion.

This crackdown has already achieved some initial results. Official data shows that in the first 11 months of last year, China’s personal income tax revenue increased by 11.5% compared to 2024, reaching a record 1.47 trillion RMB. However, amid a continued sharp decline in land transfer income that drags on the national treasury, overall fiscal revenue in the first 11 months decreased by 0.2% year-on-year. This fiscal pressure, combined with the need to curb local government debt, has recently led to a reduction in fiscal support for the economy.

Jane Cheung, partner at PwC Consulting (Shenzhen) Office in Shanghai, said, “Tracking and individually reminding every taxable individual requires significant resources, so it was almost impossible to accomplish in the past. But now, with the empowerment of AI and other technologies, tax authorities can more easily access relevant information and send reminders to individuals. Therefore, this will become a long-term trend.”

Cheung added that compared to previous years, her department has seen a fourfold increase in monthly consultations from high-net-worth individuals over the past few months. Personally, she almost has new clients every day; to cope with the surge in inquiries, she has extended her working hours. Alan Jia, founder of Jupiter Family Office in Hong Kong, also said he has observed a continuous rise in consultation volume over the past few months. He said, “Many clients are confused and nervous because they have no idea how much tax they should pay or how to remedy their situation.”

Now, the question is whether China will also retroactively pursue cases from 2018—the year China joined the Common Reporting Standard (CRS), a global information-sharing system designed to prevent tax evasion. If it traces back to 2018, it would mean that all overseas asset income from the past 8 years could be taxed, which would be an astronomical number.