What role did private equity funds play in Bank of China’s tax avoidance?

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Bank of China Utilised Private Equity Funds to Facilitate Tax Evasion

The Bank of China engaged in tax avoidance by reclassifying 11 private equity funds as public funds. This maneuver, achieved through employee contributions, allowed the bank to benefit from tax exemptions, ultimately evading 2.4 billion yuan in taxes. The auditor's report highlighted this specific method as central to the bank's tax evasion scheme.
Reclassification of Private Equity Funds

To circumvent tax obligations, the Bank of China instructed its employees to make small personal contributions, ranging from one to 100 yuan. These pooled funds were then used to package 11 existing private equity funds in a manner that presented them as public funds. This strategic reclassification was the primary mechanism enabling the subsequent claim of tax exemptions.
Enabling Tax Exemptions

By successfully reclassifying the private equity funds as public, the Bank of China was able to qualify for tax exemptions that would not have been applicable otherwise. The auditor's report details that this process was instrumental in facilitating the evasion of 2.4 billion yuan in taxes. The distinction between private and public fund taxation structures in China was exploited to achieve this financial outcome.
Scale of Tax Evasion

The tax evasion facilitated by the reclassification of private equity funds amounted to 2.4 billion yuan, a substantial sum according to the National Audit Office's findings. This figure represents the direct financial benefit derived from the scheme between April 2023 and August 2025. The report by the National Audit Office, released on a Tuesday, brought these financial irregularities to light.

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What role did private equity funds play in Bank of China’s tax avoidance?

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