Gaming Tax Rates to Match Liquor Industry? Multiple Game Companies Respond: Claims Are Untrue

21st Century Business Herald | Wu Liyang

On February 3, market rumors circulated suggesting that the financial sector and internet value-added services—such as in-game purchases and online advertising—could become the next targets for tax rate adjustments due to their relatively high profit margins and lighter tax burdens. Some claims even drew comparisons to the liquor industry’s tax rates. The speculation triggered a broad sell-off in internet stocks, with shares of companies such as Tencent coming under pressure.

The backdrop to the rumor was a recent policy update involving telecom operators. China Mobile, China Unicom, and China Telecom simultaneously announced that, in accordance with the Announcement on Matters Concerning the Specific Scope of Value-Added Tax Collection (Ministry of Finance and State Taxation Administration Announcement No. 9 of 2026) issued on January 1, they would uniformly apply a new VAT rate. Under the new rules, the applicable rate for basic telecom services increased from 6% to 9%.

In response to speculation about a potential tax hike for the gaming industry, reporters from 21st Century Business Herald verified the claims with multiple industry sources. All indicated that they had received no information through any channel suggesting an impending tax rate adjustment, and that the credibility of the rumor was very low.

A public relations executive at a Shanghai-based game company told reporters that no official documents had been issued by fiscal, tax, or other relevant regulatory authorities. Nor, the executive added, had there been any recent meetings, briefings, or consultations seeking industry input on possible tax changes.

A senior representative from a leading Guangdong-based gaming company was even more direct, stating clearly that the rumor was false.

A research note from Everbright Securities further reinforced this view, arguing that the rumor does not hold up under scrutiny of tax categories, legal frameworks, or policy logic. According to the firm, investors need not overinterpret the claims.

The report first pointed out a fundamental misconception in the rumor: confusion between different types of taxes. Claims that “game taxes could move closer to the liquor industry’s 32% rate” are misleading. The 32% figure for liquor refers to consumption tax—comprising a 20% ad valorem tax plus a specific tax of RMB 0.5 per 500 grams—whereas in-game purchases and advertising services are subject to value-added tax. The two taxes differ entirely in nature, taxation logic, and legal basis, making any notion of “convergence” unfounded. Under the current system, finance, gaming, and advertising all fall under “modern services” within the VAT framework, with a statutory rate of 6%. This is clearly distinguished from sectors such as basic telecommunications and construction, which are subject to the 9% rate, leaving no policy basis for reclassifying internet value-added services into a higher bracket.

Second, the report emphasized that tax rates are constrained by legal rigidity and are not easily adjusted. The Value-Added Tax Law of the People’s Republic of China, which took effect on January 1, 2026, explicitly sets out three VAT brackets: 13%, 9%, and 6%. Financial services and modern services are firmly categorized under the 6% rate. The recent Announcement No. 9 of 2026 only adjusted the VAT rate for basic telecom services from 6% to 9%, without involving financial services or internet value-added services. Any change in statutory tax rates would require a rigorous legislative or administrative process, not market speculation.

Finally, the rumor runs counter to the current policy direction. Policymakers are focused on stabilizing growth, fostering innovation, and supporting industrial upgrading. The platform economy, as well as the global expansion of the gaming industry, remains an area of policy support. Implementing a sweeping tax increase on these sectors would conflict with broader economic objectives. While there is ongoing discussion around the tax burden of the financial sector, regulators have shown a preference for structural adjustments—such as optimizing deduction mechanisms—rather than blunt rate hikes that could negatively affect credit supply and financial stability.

Everbright Securities further noted that future tax normalization is more likely to involve stricter reviews and clean-ups of eligibility for certain tax incentives, such as high-tech enterprise qualifications, rather than an outright increase in statutory tax rates. Such measures would have limited and manageable impact. In the long run, the core drivers of leading internet companies’ valuations remain business growth, progress in AI commercialization, and improvements in profitability. Short-term sentiment fluctuations, the report concluded, do not alter the long-term investment logic.