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Alibaba Warns of Higher Taxes as China Crackdown Widens

  • Some of Alibaba’s units lost their preferential tax status
  • China’s campaign to rein in big tech extends to incentives
General Images of Alibaba Group Holding Ltd. Ahead of Fourth-Quarter Results
Photographer: Qilai Shen/Bloomberg
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Alibaba Group Holding Ltd. has warned investors that years-long government tax breaks for the internet industry will start to dwindle, adding billions of dollars in costs for China’s largest corporations as Beijing extends its campaign to rein in the sector.

China’s No.1 e-commerce company told some investors during post-earnings calls this week that the government stopped treating some of its businesses as so-called Key Software Enterprises (KSE) -- a designation that conferred a preferential 10% tax rate, according to people familiar with the matter. The Tmall operator forecasts an effective tax rate of 20% for the September quarter, up from just 8% a year ago, the people said, asking not to be identified discussing private conversations. Going forward, Alibaba warned that most internet companies will likely no longer enjoy the 10% rate, they added.