<Editor's Pick>How does Alibaba become the king of taxpayer in China?

Although “tax amount” is not a necessary indicator for listed companies to disclose, Alibaba has a tradition of publicizing this indicator before listing. On April 1st 2018, Alibaba announced that in 2018, it has paid a total of 51.6 billion yuan to the state together with Ant Financial Services Group , a year-on-year increase of more than 40%. This is the sixth consecutive year that Alibaba has become the tax king of the Chinese Internet industry since 2013. Alibaba's tax payment has increased by 7.3 times in six years.

The Internet company who announced the tax payment amount to the public is rare. Baidu recently announced that in 2012, the tax amount was 1.5 billion yuan, and Xiaomi paid 1.9 billion yuan in the same year, which was far lower than Ali. At the end of 2018, JD.com, Xiaomi and Baidu were among the top 100 private enterprises in Beijing. The top 100 private enterprises in the list had a total tax payment of 65.551 billion yuan. Alibaba pays 51.6 billion yuan in taxes, which is not far from the overall tax payment of the top 100 private enterprises in Beijing.

The retail industry has its own particularities. Different retail platforms have different business models. In terms of tax burden, Alibaba ranks first in the retail industry worldwide. According to incomplete investigations, the actual tax burden of China's retail industry has been about 3% in recent years. The overall tax burden of large retailers such as Suning has remained above 3.5%, while Alibaba has reached 16.54%. Amazon was reported to have been taxed to 0 for the US government not long ago, and it has been taxed to 0 for the second consecutive year. Amazon explained this: “Corporate tax is based on profit, not revenue. Given the fierce competition in retail business, lower profit margin, combined with our continued huge investment, our profits are still not high."

Why do Alibaba become the tax king in many Internet giants and the retail industry around the world? I think the core reason is its unique business model.

How does Alibaba become “tax king”?

Why does Alibaba's tax payment grow so fast? The direct cause is performance. In the fourth quarter of 2018, Alibaba Group's revenue increased by 41% year-on-year to 117.278 billion yuan, becoming China's first Internet company with a single-season revenue of 100 billion yuan. The revenue growth rate exceeded that of the Silicon Valley's five giants FAANG and China's Tencent and Baidu giants; Net profit was 30.964 billion yuan, a year-on-year increase of 33%. There is a positive correlation between tax amount and performance include revenue and profit. The growth rate of Alibaba tax is basically the same as the growth rate of revenue (the Ant Financial Services Group has not been listed yet, there is no public data). The high tax burden is directly related to its unique platform model. Alibaba maintains such a growth rate during the macroeconomic downturn, which is also directly related to its unique platform model.

Based on the unique platform model, Alibaba is not only becoming a king of taxpayer, but also driving the taxation of enterprises in the entire ecology. For example, in 2017, Alibaba directly contributed 36.6 billion yuan in tax revenue, and the amount of taxation for ecological upstream and downstream actually exceeded 290 billion yuan - As a comparison, the national tax revenue in 2017 was 1,443.6 billion yuan, and 290 billion yuan was already very impressive.

E-commerce promotes commodity trading, and transactions generate taxes. Behind the circulation of goods will drive the development of manufacturing, logistics, finance and other industries. Each industry is connected with more industries, such as manufacturing and equipment and raw materials. Behind the need for a commodity to reach consumers is the synergy of a large number of industries, and the business between different parts of the industry chain, which will naturally generate more taxes. Coupled with the acceleration of new retail sales, the number of businesses and brands entering the Alibaba ecosystem has increased, and the tax revenue it has driven has increased further.

Alibaba is not just an e-commerce company. In recent years, its business map has spanned multiple industries, from retail, life services, tourism, entertainment, finance and health. It has become a huge digital economy, satisfying users' needs in every aspect. In the process, Alibaba has opened more and more branches in more and more places across the country, contributing taxes to the local area and driving more industries to pay taxes.

At a deeper level, Alibaba's wish is “To make it easy to do business anywhere”, and taxation will occur in the process of business – business is the foundation of the economy, and the economy is the source of taxation. This is not difficult to understand.

The continuous growing tax payment is also the epitome of the “Alibaba effect” based on the unique platform economy.

“Alibaba effect”

It is not only the taxation of all works of life and enterprises in its economy that Alibaba has driven. Based on the platform economy, the “Alibaba effect” has already taken shape. Unlike many Internet companies' “destructive innovations” in traditional industries, Alibaba's platform-based open model has the ability to stimulate industry vitality and increase corporate effectiveness. Based on this, Alibaba is helping more and more industries.

In 2013, Alibaba's intelligent logistics platform Cainiao Smart Logistics Network Limited was established to integrate social logistics resources to form an intelligent logistics network, achieving the goal of 24 hours nationwide delivery, 72 hours global delivery and one billion parcels a day. Directly benefiting the entire logistics industry, the logistics technology such as electronic surface is becoming more popular. The efficiency of the logistics industry is increasing while the cost of the market is growing, and the cost is reduced. Many logistics companies that have joined the Cainiao Smart Logistics Network have already achieved listing, and the performance growth is strong. The Cainiao Smart Logistics Network also drive a large number of employment in the logistics industry.

In October 2016, when Alibaba proposed the new retail concept, some traditional business owners and even e-commerce giants were scornful. However, today's new retail has become the consensus of retail and even consumer industries. Alibaba's new retail ecosystem has gathered partners from the physical retail giants, the world's top brands, real-time logistics service providers, and new retail service providers to accelerate the popularity of new retail. Many e-commerce platforms have their own names, but in fact they are all working hard to do the new retail.

The new retail model has greatly stimulated the vitality of the traditional retail industry, helping the physical retail giants to rebuild the human goods market. Consumers can experience and purchase goods anytime and anywhere, bringing growth to the brands. New retail has become the dividend of the entire industry, and even appears the "new retail concept stocks". As long as there is Alibaba's new retail-related positive news, the relevant stock sector will respond at once. Like the logistics industry, the new retail model has also led to more employment. There are more engineers behind the AI application, new retail stores need higher quality staff, and real-time logistics in the same city has spawned the new position of “rider”...

Not only in the retail and logistics industries, but also in the industries where finance, entertainment, health, tourism and life services are infiltrated by Alibaba, Alibaba emphasizes the concept of “no destruction”. In promoting inclusive finance, Alibaba once said that “if the bank does not change, we will change the bank” – note that it is change, not replacement. “Change” is the essence of the “Alibaba effect”, which is to help traditional industries become better through new technologies, big data and new models, such as more efficient and worth experiencing.

Jack Ma made this idea more direct when he participated in the Fortune Forum in 2017. He said, "We don't want to undermine the traditional economy." He suggested that "traditional retail should embrace technology reform and reform the business, not fear." Technology... work closely together online and offline, and this is the goal of new retail.

Based on the unique platform model, Alibaba can become a growth agent in all walks of life. When entering an industry, it will revitalize an industry, let its enterprises embrace technology, improve efficiency and achieve growth, they have all benefited as long as they actively embrace the new technology wave. Of course, there are also old-fashioned companies that have gone down, but it is not Alibaba that is eliminating them, it is the trend of the times.

In this regard, Alibaba is very different from Amazon. When the latter enters an industry, it will make traditional practitioners in the industry feel frustrated because it uses the Internet to do traditional business. The former uses the Internet to help traditional businesses do better. The real competitors of it are only the same kind of platforms – which is not much in the world, only in some subdivisions. It is precisely because of this that Alibaba has formed a unique economic model, and the “Alibaba effect” has become more and more prominent in all walks of life.

Based on the "Alibaba effect", Alibaba is giving back to the society from the aspects of taxation, employment, poverty alleviation, public welfare and education.

How should Internet companies give back to society?

"Tax" is the general term for the government to impose physical things and currency on individuals and legal persons in order to maintain its operations and provide public services to the society. Since the ultimate use of taxation is for social public service, the essence of corporate taxation is to give back to the society. The tax amount is also the most direct embodiment of the enterprise giving back to the society.At the beginning of the establishment of Alibaba, taxation was regarded as a means of returning to the society. At that time, it was proposed to pay one million yuan a day. Now the tax amount has exceeded 140 million every day. The annual tax payment of 51.6 billion yuan is equivalent to the tax revenue of the second-tier city.

Tax payment is only one aspect of Alibaba's giving back to the society. As the most socially rewarding Internet company in China, Alibaba has become a model for Chinese Internet companies. Since its establishment 20 years ago, it has formed a unique concept of corporate social responsibility.

First of all, Alibaba does not like to give a "show" to the community. In the disaster-stricken donation activities, there are always enterprises rushing to the front, and even “violent philanthropists” such as Chen Guangbiao. Although these donations are true, it is inevitable that people think it is a temporary rise or have their own purpose. What the society really needs is the continuous feedback of the company so that it can be sustainable. Alibaba has always emphasized sustainable feedback, and continuously gives back to the society in terms of taxation, employment, public welfare, poverty alleviation, etc. Social responsibility is part of Alibaba's daily business activities. It can be seen from that Alibaba takes participation in public welfare time as employee KPI.

Second, Alibaba combines business and social feedback. From the desire "To make it easy to do business anywhere", it can be seen that Alibaba is a sentimental enterprise. Some people say that this is to change the world and to solve the most difficult problems in the society. To solve the problem of "To make it easy to do business anywhere ", we cannot rely solely on slogans, feelings or ideals. Everything Alibaba has done in these years, whether it is B2B, Taobao, Tmall, Alipay, Cainiao Smart Logistics Network, can be attributed to this wish.

It seems that Alibaba is doing business, in fact, it is also giving back to the society. Only by combining with business can we form a positive cycle and continue to do it. In fact, Alibaba's public welfare also emphasizes integration with business. For example, Alibaba has put forward a famous viewpoint in the public welfare field:enterprises should use the "public interest mentality, business methods" to do public welfare.

Finally, the "Alibaba effect" is essentially a feedback to society. Now Alibaba claims that it is "Alibaba commercial operating system". Business partners call their various basic capabilities on the system, including retail, logistics, finance, technology, etc., to achieve their own development; partners can access their operating systems like U disk drives, providing services to more customers and users. The operating system is only the beginning, Alibaba is determined to become the infrastructure of the economy of 2 billion people in 20 years, which is itself a feedback to society. The “Alibaba effect” will become more and more prominent in more industries, and ultimately make the world a better place.

If Alibaba becomes a king of taxpayer reflects on the “money” that has been given to the society, then Alibaba’s multi-dimensional sustainable contribution to society, “making the world with no difficult business” and step by step, the positioning of the commercial operating system and the new economic infrastructure, as well as the formation of the Alibaba effect, is to “power” the society. Enterprises may not be able to become king of taxpayers, but they can do the same as Alibaba, as a “model citizen”.

Photo from weibo official account of Alibaba

This is an article from Sina, translated by Xu Yin.