[Home] [Databases] [WorldLII] [Search] [Feedback] Laws of the People's Republic of China

You are here:  AsianLII >> Databases >> Laws of the People's Republic of China >> CIRCULAR OF THE STATE COUNCIL CONCERNING STRENGTHENING TAX ADMINISTRATION BY LAW AND REAFFIRMING TAXATION POWERS

[Database Search] [Name Search] [Noteup] [Help]

CIRCULAR OF THE STATE COUNCIL CONCERNING STRENGTHENING TAX ADMINISTRATION BY LAW AND REAFFIRMING TAXATION POWERS

    The reform of the tax systems in 1994, which, as a result, further
strengthened the legal systems of taxation, laid down stringent provisions on
tax reduction and exemption and defined taxation powers, has proven to be
positive for the state to exercise macro-control, implement industrial
policies, bring about fair competition between enterprises, promote
restructuring in enterprises and increase financial revenue. However, there
are still so many problems in performing tax policies by a number of
localities and departments. For instance, some make adaptive provisions of
state tax policies without authorization and grant tax reduction or exemption
beyond their powers; some wantonly allow taxpayers to defer or to be behind
with tax payment; some contract for tax collection; and some impose excessive
taxes. These problems are seriously disturbing the normal fiscal order and
impairing the consolidation and perfection of the fiscal system. In order to
safeguard the solemnity and dignity of laws and regulations of taxation
(hereinafter referred to as "tax laws"), reinforce tax administration by law
and enforce taxation powers, this Circular is hereby issued as follows:

    1. State tax laws and provisions regarding taxation powers should be
enforced strictly. The legislative powers in respect of central taxes, common
taxes and local taxes shall be centralized by the central authorities. Each
locality and each department should collect taxes by law, handle financial
affairs by law, and should not institute or interpreter tax policies beyond
their powers, neither they may exceed their terms of reference to grant tax
reduction and exemption, nor allow deferment of tax payment, nor exempt
somebody from taxes that have been overdue. Except for animal slaughtering
taxes, banquet taxes and animal husbandry taxes of which administrative powers
have been expressly transferred to the local authorities, the central
authorities shall centralize the administrative powers of all other kinds of
taxes. Local governments shall not make changes, adjustments or adaptive
provisions in respect of tax laws and tax policies beyond their terms of
reference prescribed expressly by tax laws. With regard to problems in tax
policies, all localities may put forward their views for adjustment and
improvement and report them to the State Council or the departments of the
State Council in charge of financial affairs. However, no locality may act on
their own authorities pending the decision of the State Council.

    2. Minority autonomous areas shall have their tax policies in conformity
with those of the whole country. Governments of minority autonomous areas
shall impose strict restrictions upon the scopes and amounts of tax reduction
or exemption when instituting their preferential tax policies as authorized by
state laws or regulations, and shall not grant their approval of tax reduction
or exemption beyond their terms of reference. Governments of the autonomous
regions directly under the Central Government shall submit preferential tax
policies instituted by them according to their terms of reference to the
departments of the State Council in charge of financial affairs for the
record. Those violating the provisions of state tax laws shall be put right by
the department in charge of financial affairs with authorization of the State
Council.

    3. Tax administration by law should be persisted in and importance be
attached to the administration of tax reduction and exemption. Tax reduction
and exemption must be executed according to the provisions of tax laws. Any
prescriptions regarding tax reduction or exemption beyond provisions of tax
laws or taxation powers shall be annulled without delay. Even the reduction or
exemption of local taxes shall be handled according to the terms of reference
granted by the central authorities. No body may institute his own rules and
act on his own authority. Once tax reduction or exemption without approval is
found, the taxpayer involved shall pay off taxes in full and the person
responsible and the person in charge shall be investigated for their
responsibilities.

    4. Further steps shall be taken to strengthen the administration of tax
collection. Tax authorities at various levels must exactly perform the
functions as prescribed in state tax laws and shall collect taxes according to
law in order to get taxes in full. Contracting for tax collection in various
forms shall be prohibited. Failure to pay taxes in full or tax exemption in
the form of deferring tax payment shall not be allowed. Exemptions granted to
taxpayers from their arrears of taxes on some pretexts shall be strictly
prohibited. Arrears of taxes that have been exempted shall be returned to the
treasure within a fixed time limit. Tax authorities at various levels must
strictly comply with the procedures and time limits provided for by tax laws
when examining and approving applications of taxpayers for deferment of tax
payment, and shall not wantonly extend the prescribed time limits for
deferment of tax payment. Imposition of excessive taxes shall be resolutely
banned and apportioning taxes equally according to the number of people or
land areas shall be prohibited.

    5. People's governments and tax authorities at all levels shall
conscientiously implement the prescriptions of the State Council regarding the
system of tax distribution and hand over revenue in strict accordance with the
levels of treasures. If anyone hands over central revenue as local revenue to
local treasure by mixing up intentionally the levels of treasures, the
offender and the leader in charge shall, in addition to returning all the
revenue that has been seized, be investigated for their responsibility.

    6. Legal systems for taxation should be strengthened and the dignity of
state tax laws be safeguarded. Financial and taxation departments shall
establish and perfect their internal supervision and discipline systems and
take vigorous action to ensure the supervision and inspection of tax
policies. Auditing departments shall strengthen the auditing over the
implementation of tax policies and perfect necessary working systems. Problems
found in the inspection and auditing shall be resolved in time in order to
ensure the proper implementation of tax policies and stop up loopholes that
cause losses of revenue from taxes. Leading officials of people's governments
at all levels and all departments shall firmly keep in mind the sense of
legality of taxation, proceed from the consideration of maintaining the
interest of the whole country and the normal fiscal order, further strengthen
the leadership over the fiscal work, lend support to financial departments in
organizing financial revenue and intensify the administration of tax
collection in order to create a favourable environment for establishing the
socialist market economic system.

    As from the date of the issuance of this Circular, each locality and each
department should make an overall inspection and rectification of the
implementation of tax policies within their own jurisdiction. Violations of
state tax laws and tax policies shall be corrected without delay. Each
locality and each department shall submit a report on the inspection and
rectification to the State Council before the end of September and, at the
same time, transfer a copy each to the Ministry of Finance and the State
Administration of Taxation.