They did not pay taxes because at that time there were no regulations, tax collection was very difficult. I don't think China bans bitcoin because of taxes but because they fear their power is threatened, China is seen as an authoritarian country, meaning power will be concentrated in one place, here the government. If bitcoin is widely used and unregulated, government power will be weakened. The Chinese government is concerned that failure to control bitcoin will lead to money laundering, money flowing abroad or bitcoin will be used for anti-government support activities...I think these are the things that they are worried about.