Most Beijingers are ignoring rules that call for those who earn more than 120,000 yuan ($17,578) a year to complete a self-declaration tax form.
Observers say taxpayers think the forms are complicated and believe the tax authorities are unlikely to trace all of their personal income, especially that from property and stock market transactions.
According to the Beijing local taxation bureau, people must report their individual earnings between January and March or they could be fined up to 10,000 yuan.
Experts pointed out that more than half of qualified taxpayers in the capital did not report earnings to the tax authorities. Compliance in major cities in the United States, by comparison, stands at 90 percent.
"I would say hardly any people who make money from selling or buying property ever report their earnings," said Liu Huan, deputy dean of the taxation school at the Central University of Finance and Economics.
"So far, the monitoring system in tax bureaus is capable of tracing personal wages or salaries, but for income made from property or stock deals, which is quite private and hidden, it's really hard to find out," Liu said.
Another reason why people shy away from tax reporting is that they see it as a painstaking task - taxpayers must carefully remember and record income from various sources, assigning them into 11 fields on the declaration form.
"After a year's hard work, I still have to deal with these trivial figures and report them to the tax bureau one by one?" said Beijing resident Liu Xiaoxue, who works in the Central Business District and earns more than 120,000 yuan a year. "Isn't that boring and a waste of time?"
But Liu pointed out that avoiding the "boring" task was morally wrong.
"Tax evasion is an immoral thing, but who will say not reporting personal earnings is immoral?" Liu said.
"Though rules explain how to punish people, I have not heard of anyone being fined because of a lack of tax reporting."
The tax self-declaration policy was introduced in 2006. Whether people have already paid personal income tax or not, they still need to make a tax self-declaration at a local tax bureau at each taxation year-end.
In 2007, around 260,000 Beijing residents completed personal tax reports. The number has increased by an average of 14 percent each year, reaching 340,000 in 2009.
The total number of tax self-declarations made in China in 2009 was 2.4 million.
Haidian district houses Beijing's largest number of tax report submitters, with Chaoyang, Xicheng, Dongcheng and Xuanwu close behind.
"Beijing is listed second in terms of the number of tax report submitters among various provinces in 2009, behind only Guangdong," Liu said.
"But Guangdong has a larger population."
However, experts point out that the number of declarations submitted in Beijing still lags far behind expectations because the capital boasts the largest number of rich people in China.
In research issued in April conducted by Hurun, a research company that has tracked China's rich and famous for 11 years, revealed there were 143,000 multimillionaires and 8,800 billionaires in the city.
