by Cheryl-Anne Sturken | July 29, 2016

China has fined the Ritz-Carlton and Crowne Plaza hotels in Beijing, along with four other companies, for using recent VAT tax reforms to justify increasing room prices, according to a report filed by Reuters news agency.

The country's top economic regulator, the National Development and Reform Commission (NDRC), posted the names of six Beijing businesses, including the two hotel chains, as well as the China World Trade Center, that had been fined more than $300,000 each for raising prices following the May 1, 2016, rollout of a new value-added tax system in construction, property, finance and life services, which cover the hospitality, healthcare and tourism industries. China, which started applying VAT to some business sectors in 2012, extended it in May to cover the final four categories.

According to the news report, Michele Lv, a Ritz-Carlton public relations manager for the comany's Asia Pacific region, said the fine resulted from a misunderstanding over the country's new tax system and that the hotel had adopted a new pricing policy over the weekend.

China's VAT-reform policy was expected to help reduce tax burdens for businesses by more than US$77.23 billion this year as part of a broader push for "supply-side reforms" aimed at cutting red tape and scaling back the role of government in business. The new VAT system replaced a direct business tax, and was introduced to reduce the burden on companies, which are facing rising costs and a slowing economy.