The importance of China on the global economic stage cannot be ignored, and its unique legal and tax systems are of great inters to international scholars and business people alike. China’s tax system is acquiring western features while remaining entrenched in its rich cultural and historical roots. This makes for interesting study, analysis and comparison as its laws are becoming more accessible. The Journal of Chinese Tax & Policy focuses on the policy, administrative and compliance aspects of the Chinese tax system. It also welcomes comparative studies between China and other countries. The Journal is an internationally peerreviewed scholarly publication.
Reflections on the Tax Disclosure System Triggered by Investment and Tax Planning by China's High Net Worth Individuals
As China’s macroeconomic situation has continually improved, China's private wealth market has also steadily expanded. According to the Hurun Research Institute, investment assets owned by wealthy Chinese households account for about thirty percent of total asset wealth. This wealth continues to grow by as much as ten percent annually. Since there has also been a significant demand for tax planning from wealthy Chinese households, we must pay attention to tax planning, possible tax avoidance and the importance of tax disclosure. At the same time, tax disclosures appear to be becoming more significant, as tax authorities seek to ensure that tax planning complies with the requirements of tax regulation. In this paper, we will discuss if it is possible to reduce the criminal behaviour associated with and the inefficiency and inequity of taxation through inadequate tax disclosure. With adequate tax disclosure, inefficiency and inequity in taxation can be resolved.
Balancing Efficiency and Equity: Insights from Australia’s Robodebt and China’s Robodebt Plus RoboCredit in Automated Welfare System
This article explores the integration of Automated Decision-Making (ADM) systems in welfare administration, drawing on the valuable experiences of Australia and China. Australia’s Robodebt scheme, designed to recover overpaid welfare benefits, revealed critical insights into the importance of transparency, accountability, and robust safeguards in ADM systems. Similarly, China’s approach, particularly Guangdong’s "Robodebt plus RoboCredit" model, provides lessons on balancing fiscal responsibility with inclusivity by combining automated alerts with human oversight to ensure fairness and adaptability. Both cases underscore the need for carefully designed ADM frameworks that address legal, ethical, and operational challenges. The article highlights how lessons from Australia and China can guide policymakers in developing welfare systems that leverage automation to enhance efficiency while safeguarding equity and public trust. By synthesizing these experiences, this study offers a roadmap for global welfare administration to integrate technology responsibly and effectively.
Comments from the Consulting Editor: Research on China's Current Charity Tax Policy and Directions for Improvement
Copyright (c) 2022 Dongsheng Jin and Yuan Li
Achievements and Challenges: Addressing the Lack of Certainty in the PRC’s Continuing Education Special Additional Deduction Policy – Insights from Australia
Chinese tax residents receiving comprehensive income1 are now allowed a deduction when they gained continuing education. This deduction is a result of the most recent amendment of the Law of the People’s Republic of China on Individual Income Tax (Individual Income Tax Law)2 in 2018. The amended Individual Income Tax Law3 came into effect on 1st January 2019. According to the new rules, taxpayers pursuing continuing education are eligible for a deduction of RMB 400 per month for a maximum of 48 months for a degree or RMB 3,600 for professional qualification education. However, in practice, such benefits seem not easy to obtain.4 This article examines the policy effectiveness of the Continuing Education Deduction according to Adam Smith’s four principles of good taxation design: convenience, certainty, economy and equality. It pays particular attention to the compliance certainty of this deduction for taxpayers. It explores major challenges for enforcing the tax deduction rules on continuing education and its in-depth reasons. It contends that Australia’s work-related self- education deduction policy could serve as an excellent example of policy certainty and inform China’s further reform of the Continuing Education Deduction policy.
Copyright (c) 2022 Jun Zhao, George Tian, Xi Nan, Ziyuan Bai
A Review of China Approach to Cooperative Compliance in Light of the International Tax Practice and the OECD Framework
Cooperative tax compliance approaches were initiated in the 2000s with the intention to allocate tax administrations’ limited resources in a more effective manner, i.e. focusing tax supervision at high-risk taxpayers while establishing a more collaborative, transparent, and trust-based relationship with low-risk taxpayers. On the other hand, taxpayers expected to gain earlier tax assurance and lower tax compliance burden. This article investigates cooperative compliance approaches identified in China, especially the ‘Tax Compliance Agreement’ and the ‘thousand companies group’, making a comparative review of such Chinese approaches to cooperative compliance, the pillars described by the OECD and cooperative compliance programs of some pioneer countries.
Research on The Reform of Tax Collection and Management for The Innovative Development of The Block Chain in Guangdong-Hong Kong- Macao Greater Bay Area
In recent years, blockchain technology has been highly concerned by countries all over the world and has caused major changes in many industries. Starting with digital currency, blockchain technology has deeply penetrated into the financial field, affected many tax related fields, and promoted the reform of tax collection and management means. Starting from the application of blockchain theory and blockchain technology, this paper analyzes the application of blockchain in financial and non-financial fields through cases, and puts forward the feasibility of applying blockchain technology to the reform of tax collection and management in Guangdong-Hong Kong-Macao Greater Bay Area under the background of the innovative development of blockchain in the Greater Bay Area, combined with the current situation and existing problems of tax collection and management in Guangdong, Hong Kong and Macao, Put forward the specific system design scheme.
Copyright (c) 2021 Zhaohui Long, Hongyi Liu
Tax Problems and Countermeasures of Digitalized Goods in E-commerce
With the rapid development of e-commerce, the transaction scale of data- based commodities is expanding day by day. However, there are many difficulties in tax treatment of data-based commodities. There are no consistent views on the attributes of tax objects, the definition of tax jurisdiction, tax collection and management mechanism and other issues. Based on analysing the disputes in various countries, combined with the existing problems in China's current tax treatment, the paper suggests that the Chinese government timely revise the tax policy on data products and make it clear that data products belong to services or intangible assets. For cross-border online sales of digitalized goods, tax shall be levied in accordance with the principle of place of consumption (recipient) and the concept of virtual permanent establishment shall be adopted. For B2B transactions, reverse taxation mechanism shall be adopted, while for B2C, a third-party tax collection mechanism shall be adopted. For domestic data commodity transactions, the mechanism of the provider declaring and paying taxes by itself is implemented.
The Source of Tax Law in the PRC: Legislative Organs and Their Legal Documents
In the comparison of the source of tax law between Australia and China, it is difficult for the public to understand each law and regulatory documents being proposed in making reasonable decisions via their interpretations in China. This paper would introduce the tax administrative power of the ATO and the tax advice system in Australia, especially the ruling system. This paper finds out that it is both an urgent and highly beneficial affair to build an advice framework such as the public rulings in Australia in China.
Copyright (c) 2021 Shaoxin Wang, Jun Zhao, Xi Nan
Calculation of Effects of the Individual income Tax – Social Assistance Policy Mode Towards Different Income Classes
In the western countries, the individual income tax referred to as "Robin Hood tax", is that the individual income tax "Robin Hood" like Robin Hood, and social relief is the main content of the social security, low-income is difficult class to maintain basic living standard "last line of defence", which is the important tool of government regulation and promoting fair income distribution. In this paper, a model of individual income tax and social relief policy is constructed. Firstly, the income distribution and the Gini coefficient of different income groups in cities and towns are measured. On this basis, the changes of income distribution and the Gini coefficient of different income groups after they receive social relief income from the government are calculated. So, we can get the comprehensive effect of the government's individual income tax - social relief policy mode. The analysis results show that the individual income tax - social relief policy model has played a positive role in narrowing the income gap, but the effect is relatively small. The research believes that the adjustment and improvement of individual income tax policy and the government's targeted increase of social relief expenditure are helpful to the goal of adjusting the income distribution gap.
Study into the Tax Policies Towards Small and Medium Sized Enterprises in China
In analyses of the role of taxation policy in the development of small and medium sized enterprises (SMEs) in China; this paper would firstly clarify the existing implementation of relevant tax policies, before exploring the empirical implications of these policies in relations to the development of SMEs. Then, through a comparative study with existing international tax policies for SMEs; and in highlighting of the differences between existing practices - a framework could be proposed in refinement of existing practices in furthering existing SME development.
A Study on Tax Policies for Personal Charitable Donations in China
Recently, with the rapid development of charities in China, personal charitable donations mainly from the working class, which is affected by individual tax policies, have grown fast. Based on the survey data from questionnaires about China’s labour force in 2011 by Centre for Social Survey (CSS), Sun Yat-Sen University, this paper studies both individuals tax policies and non-tax factors that would influence personal charitable donations. According to the research, the effective tax rate of the individual income tax has a positive correlation to the amount of personal charitable donations - on which tax deductions policy has an incentive effect. The higher the education level, the more influence the tax deductions policy would have; despite this being weakened by Engel’s coefficient. This influence of tax deductions policy is also weaker, and the incentives of effective tax rate is stronger, on the low-income than the high-income groups. However, both policies would have a stronger influence on areas with a larger income inequality than areas with a smaller income gap
Copyright (c) 2021 Zhaohui Long, Wenfei Yang
Comments from the Consulting Editor: Reflections on the Basic Experience of China’s Tax System Reform in the Past 40 Years
2018 is the 40th year of Tax Reform after the implementation of “reform and opening up” policy in China, the 40-year Tax Reform has achieved remarkable achievements and attracted worldwide attention. This article reviews the development of tax reform in the past 40 years and believes that the perfection of tax system in the economic field is basically completed. The improvement of tax system in the personal distribution field will become the key point. The adjustment of tax system structure will be included in the vision of “Comprehensively deepening tax reform”. The optimization of tax system will be fully launched. This article summarizes the main experience of tax reform and believes that the 40-year Tax Reform has always adhered to the overall goal of tax reform. The top design and the society’s strong support are the guarantee. They are always closely linked with the economic system reform, always adhere to carry out and improve the tax reform step by step, steadily and gradually, and always adhere to the combination of unified tax law and flexible tax policy. This article puts forward the thinking of further deepening the tax system reform. And believes that deepening the tax system reform should further optimise the tax structure, pay more attention to the overall promotion of comprehensive reforms, strive to realise the internationalisation of China's tax system, make full use of modern scientific and technological means, build a fair, simplified and efficient modern tax system.
CORPORATE TAX INVERSION: A LESSON LEARNED FROM THE UNITED STATES FOR CHINA
This article discusses the causes of “corporate inversion” in the United States (U.S.) today. It points out three tax loopholes in the U.S. tax law. They are the worldwide income tax system, the highest tax rate in the world, and no U.S. taxation on foreign-sourced income until dividends are distributed. This article also attempts to compare the U.S. tax law with that in China. The purpose is to explore whether China will suffer from the same debacle of corporate inversion as the U.S. did. It was appalling to find out that, in addition to the same worldwide income tax system, China imposes tax on the foreign-sourced income completely and immediately without a chance of deferring the tax liability. This defect makes the Chinese tax system the worst in the world. There was indeed a lesson to be learned from the U.S. for China. This article further provides an example in determining the tax liability without and with corporate inversion. The purpose is to illustrate the tax savings by using a corporate inversion strategy. In order to curtail the abuse of a corporate inversion, recently, the United States Congress enacted IRC §7874 and the Internal Revenue Service issued Notice 2014-52. This article reveals penalties imposed under these new tax regulations. It also serves as a warning to the Chinese multinational corporations.
A Comparative Study of Transfer Pricing Taxation System between China and Australia
As defined, transfer pricing is the setting of price for goods and services or intangible assets sold between related entities within an enterprise. In international economic activities, international companies could shift transfer pricing in order to achieve best profit in a way setting major profit into an entity within a country which has relatively lower tax rate. Under economic globalization, international business contributed enormously in the growth of global economy, which explains why transfer pricing has growing concern among policy makers all around the world. Currently, we have already founded a relatively complete transfer pricing taxation policies, and empirically developed for decades. However, as we are in our ‘starter’ period, there are still huge gap between us and developed countries. Recent data shows that we had experienced extraordinary tax loss on transfer pricing at RMB 30 billion in financial year 2012-2013. Meanwhile, Australia, where china imports most of ores and wools from and exports technique products and textile to, these two country have had an integral business relationship and relies on each other. This article would basically compare transfer pricing in these two countries and would come up with approaches in approving transfer pricing taxation policies in China
Copyright (c) 2019 Zhaohui Long, Shuoyu Huang
China’s New Transfer Pricing Rules & Their Implications to Cloud-related Multinationals - Blockchain as a Supplementary Solution
Technology companies are at the forefront of multinationals operating in a developing new global tax environment. Their ever-evolving and increasingly borderless cloudbased business models have set off a scramble among companies and governments around the world to grasp cloud taxation issues and impacts.
Contributing to the Individual Income Tax Reform Debate in China: Is Family Based Filing of Individual Income Tax Returns a Feasible Solution to the Social Problems Arising from the Increasing Family Income Inequality in China?
China’s new wave of Individual Income Tax Reform is currently hotly debated. The Finance Minister, Lou Jiwei was reported to say that the relevant government departments in China – the State Council, the Ministry of Finance, and the State Administration of Finance had worked out a reform plan together in 2015. One goal of this plan is to move China’s scheduler individual income tax to a global structure, and to put in place policies that contribute to income redistribution that takes into consideration family related expenditure, such as looking after the elderly and childcare. A review of the literature shows that Chinese scholars and commentators suggest that China could learn directly from the US, adopt their global income tax system and allow family based filing of individual income tax returns. The literature does not provide reasons for this suggestion. This paper performs a feasibility study to assess whether China could adopt the suggestions proposed by the prevailing literature. The study is performed based on a “revenue neutrality” analysis that compares projected revenue from existing policies, and that collectable if China allows family based individual income tax filing. Results from a pilot study reports that the projected revenue from allowing family based individual income tax filing would be at a level that is closer to 40% of revenue collectable if China does not allow family based individual income tax filing. This result suggests that policy makers in China need to take careful considerations of costings before proceeding with the reform.
Research on the Replacement Business Tax with ValueAdded Tax of Chinese Banking Industry
As the heart of China’s financial system, the banking industry plays an important role in the nation’s economic development. Under Chinese current financial tax system, the main taxes levied to Banks are business tax (BT) and income tax. Shouldering heavy tax burden and being taxed repeatedly, such policies on the Chinese banking industry undermines the integrity of Value-Added Tax (VAT) chain, contrary to the international guiding rule that the financial industry should be lighter taxed. The defect of Chinese financial tax system makes the phenomenon that the capital accumulation rate is lower than business expansion rate. As a result, Chinese banking industry lack a foundation for further development and international competitiveness. This paper, using developed countries’ successful experiences in financial tax system for reference, in combination with China's practices, proposes to include the banks into the levying scale of VAT, handling local and central income distribution properly to consummate Chinese financial tax system reform in replacing the business tax with VAT gradually.
Copyright (c) 2021 Zhaohui Long, Mengwei Cai, Ke Zhang
Empirical Research on the Influences of VAT Reform on Regional Factor Input Investment According to China’s Prefecture Level Panel Data from 2002 to 2010
From its transformation to expansion, the internally progressive logic of China’s Value Added Tax (“VAT”) reform has been ever-present in its scope for collections and deductions. An excellent sample of this could be seen in the decade of data preceding and following the V A T transformation in observing the implications of the VAT reform. By using the Two-Firms Model and China’s 255 prefecture-level cities’ panel data, this paper applies DID to test the impact of the VAT reform upon regional investments, employment, and wages overall. Many key conclusions arose. This includes that through layoffs rather than pay-cuts, the VAT transformation has promoted the “substitution of capital for labour”. Also, after “Business to VAT”, enterprises now prefer to use deductible outsourcing services rather than their own services, and that the VAT reforms and its accompanying time lag has seen more long-term impact than short term. Finally, the VAT reform has given birth to an "intertemporal tax avoidance" in mirroring observable postponing of investments. With the progressive advancement of “Business to VAT”, future research directions could include examining trends in empirical data to compare implications of differing VAT systems that accompany their disparate reforms.
Transaction-based Tax Evasion on Chinese E-commerce Platforms: Compliance Difficulties for Three Types of Taxes, VAT Reform, and New Winners
Shopping on e-commerce platforms is no longer a new phenomenon. Buying and selling goods on this medium naturally gives rise to cross-border transactions that involve the internet. Due to the size of the population, Chinese e- commerce platforms such as Taobao and T-Mall of Alibaba, and JD.Com undoubtedly are market leaders. The typical modes of goods transaction via e-Commerce platforms are consumer to consumer, business to consumer, business to business, and operator to consumer transactions. One heated debate now, especially in China, revolves around the challenges of taxing these transactions. The Business Tax to Value Added Tax (VAT) reform that was completed in 2015 presents new tax compliance challenges that resulted in a new group of winners, namely, suppliers of technological solutions. The international tax compliance issues for traditional transactions are relevant to these new transaction types. The main feature cross-border goods transactions through E-Commerce Platforms that differ from traditional transactions is that the internet facilitates those transactions, thereby leaving a digital footprint at every stage of the transaction. These digital footprints could be captured by technology. This paper identifies the particular tax types that are of concern. They are customs duties, VAT and income tax. The paper discusses types of transactions involving different parties, and analyses the possible tax liabilities and taxing points during the cross-border movements of the good, from the seller to the buyer, and the digital footprint they are leaving.
Copyright (c) 2020 Xi Nan, Eva Huang, Jun Zhao
Intellectual Property-related Tax Avoidance Arrangements: China’s New Transfer Pricing Rules & Implications for Technology-related companies operating in China
Cross-border Tax Avoidance is not a new concept. It affects every country, particularly developing countries. The United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report 2015 indicates that the amount of corporate profits shifted from developing countries is about $450 billion USD,[1] and found that tax avoidance practices result in a significant leakage of development financing resources and an estimated $100 billion USD tax revenue loss per year for developing countries.[2] China, as one of the largest developing countries, also suffers a lot from tax avoidance practices by multi-national enterprises (MNEs). Chinese state media estimates that tax evasion and avoidance by foreign companies costs the world's second largest economy at least 30 billion Yuan ($4.8 billion USD) in tax revenues each year. [3] In recent years, particularly after G20 conference in Australia in 2013, China has taken transnational tax avoidance issue seriously. In November 2014 China levied about $140 million in back taxes from Microsoft Corp in the first major case concerning cross-border tax evasion in the country.[4]Furthermore, the Chinese government has increased tax scrutiny of foreign companies by the implementation of new rules designed to rein in cross-border tax avoidance, particularly transfer pricing arrangements. This article examines the major forms of intellectual property (IP) related tax avoidance activities conducted by major technology-related MNEs, in particular, China’s new anti-tax avoidance rules and policies (such as particular transfer pricing regulations). These include the Public Notice Regarding Refining the Reporting of Related-Party Transactions and Administration of Transfer Pricing Documentation (SAT Public Notice [2016] No. 42) (“Public Notice 42”) issued by the State Administration of Taxation (“SAT”) of China, and the SAT’s submission to the United Nations Practical Manual on Transfer Pricing for Developing Countries (the Manual) in December 2016.This article explores the implications of these new rules and policies to IP related transactions. It also attempts to provide some practical suggestions for technology-related MNEs operating in China. [1] UNCTAD, World Investment Report 2015 – Reforming International Investment Governance, at 200 http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf [2] Ibid. [3] Michael Martina, Firms prepare for new tax rules as China vows crackdown (Reuters Market News, Jan 31, 2015) at http://www.reuters.com/article/china-taxavoidance-idUSL4N0V91IR20150201 [4] Ibid.
An Empirical Study on Corruption and Tax Compliance: Based on Time Series from 2000 to 2014 in China
Since 18th China Communist Party’s National the new central government has adopted a “zero tolerance” policy towards corruption, aiming to keep the corruption in the cage within the system. The new policy awarded strong support from the public throughout the country. Will anti-corruption enhance the tax compliance level of taxpayers? This paper based on such a condition, by using the 2000-2014 time series data in China as samples, adopting multiple regression analysis to find out the empirical analysis of this problem. The empirical results show that government corruption is negatively correlated with the tax compliance degree of taxpayers, that is, the lower the corruption degree of a country, the higher the tax compliance level of taxpayers. This conclusion shows that government’s anti-corruption is conducive to the country’s fiscal revenue, and government anti-corruption should be sustained.
Copyright (c) 2018 Dan Cheng, Qingjia ZENG
The ideas about the model and structure of China’s local tax system
Since the reform of tax sharing system in 1994, China has preliminarily set up a local taxation system which plays an important role in forming a public financial framework that meets the requirements of market economy. However, because of the unreasonable elements in current local tax sharing system such as local taxation lacks efficient major taxes categories and problems between state taxation and local taxation, which might bring instability to the financial fields between central and local government. Under the principal of accelerating government functions transformation and modern country governance system construction, the mode that “central government has the rights to legislate taxation laws and to cease collecting tax while local government are entitled to the rights to adjust and explain taxation laws” should be conducted in the area of tax power distribution; In the modes of taxation income distribution, we should focus on sharing tax in short term and gradually develop main tax types in local areas; In the long run, we should place importance on mature local main tax types with the feature of tax sharing so as to form the pattern that tax sharing distribution and local tax revenue have an equally important role.
THE COMING OF AGE OF ENTERPRISE TAXATION IN CHINA
Abstract This article commences with a brief historical overview of the taxation system in China and provides a context for the key elements relevant to foreign enterprises since the Open Door Policy. The unified taxation of domestic and foreign owned business enterprises recognises the maturity of China’s economy and the greater role that domestic enterprises are playing in the world economy and, consequently, the need to ensure competition is on a level footing. However, the primary concern of this article is to provide an analysis of the ‘principles based’ unified enterprise income tax regime that commenced operation on 1 January 2008 together with its implementing regulations. This analysis reinforces China’s integration of western tax concepts albeit in a much simplified manner than most economically developed regimes. However, the unified regime does pave the way for China to utilise the benefits of that unification to enable development of better wealth distribution throughout the nation and thereby enhance economic development. This article also demonstrates that domestic businesses were at a disadvantage before this unification and that disadvantage led to behaviour that sought to circumvent the disadvantage by utilising the loopholes available between the Domestic and Foreign Enterprise tax rules. The article concludes that this reform is as much an attempt at ensuring competition is equal between domestic and foreign sectors of the Chinese economy as it is about dealing with tax avoidance. The introduction of specific and general anti-avoidance measures is evidence of this dual purpose. It is perhaps too early to judge the performance of this new regime, but once the grandfathering arrangements come to an end, the true impact of the unified Enterprise Income Tax Law will become apparent.
Characteristics of the Chinese tax system and its cultural reasons: in comparison with the West
China’s tax system is characterised by the co-existence of formal taxes, sundry levies and hidden taxes. In China, multiple authorities with tax law making powers and tax administration powers exist. This leads to issues of tax jurisdiction and tax compliance such as differential treatment between local administrative areas and between taxpayers who have different status in the tax system. These unique characteristics of the Chinese tax system are rooted in China’s special national circumstances. These national circumstances include issues of economic development, political system and issues that are culturally specific. Further, a ‘human relationship system’ arises from that culture, where the behaviour of politicians, grassroots administrators and the taxpayers cannot be viewed in isolation. Looking deeper, the reasons behind these characteristics relate to the status- conscious culture in China. This is exemplified in the saying “Criminal punishment does not apply to senior officials and the etiquette does not apply to common people”[1], and the selfish culture of human sympathy[2], face relationships, and “if it is not my business, hang it up”[3].This article discusses the main characteristics of the Chinese tax system, comparing it to prevailing systems in Western developed nations. It focuses on cultural attributes, providing a backdrop for understanding the full picture of the Chinese tax system. [1] Translation of “礼不下庶人，刑不上大夫” from Liji. Liji is an ancient Confucian Classic on the law and system of government written during the War Lords period. [2] Human Sympathy operates parallel to the law in China’s administrative system and governance structure. [3] Translation of “事不关己，高高挂起”.
Influence of Property Tax on Household Consumption - Based on Calculation of Property Tax Burden
Property tax is a crucial part of tax policy, and it also plays an important role in regulating household consumption. In order to objectively evaluate the impact of property tax on household consumption, this paper redefines the statistical measures of residents’ burden of property tax, and calculates the property tax burden of Chinese residents using a statistical approach to analyse flow of funds. It is concluded that real estate tax have a certain impact on household asset choice and consumption. Based on this conclusion and the long-term effect of taxation, a series of proposals of establishing a proper property tax scheme are put forward in this paper.
Individual Income Tax Reform in China: Reflections on New Zealand’s Experience
New Zealand (NZ) has taken a path towards tax simplification with respect to individual taxpayers who are not involved in business or self-employed, since the mid-1980s, following the election of the Fourth Labour Government in 1984. The governing principle has been to enhance efficiency and reduce complexity from the perspective of the NZ Government and Inland Revenue, while placing less weight on potential equity issues. This has seen the removal of deductions for wage and salary earners, the removal of the need to file returns (accompanied by personal tax summaries) for those with income taxed at source, and formalising self-assessment. For individuals who are in business or selfemployed, the drive more recently has been to reduce their compliance costs following significant tax reform since 1984, while retaining their ability to claim deductions. This differential approach has placed greater emphasis on the employee versus self-employed distinction. Going forward, Inland Revenue, in conjunction with the NZ Government, is embarking on the largest IT-focussed project in NZ’s history – the Business Transformation Programme – that is intended to take tax administration well into the 21st Century. Further simplification, greater withholding accuracy, and an online environment as the primary interface between Inland Revenue and taxpayers, are key themes. Thus like the Peoples Republic of China (PRC), NZ is undertaking significant reform of the way individuals will engage with, and meet, their tax obligations.
Reshaping the Financial Regulatory Framework in China: Improving the Individual Income Tax on Securities Trading
China has embarked upon several financial system reforms over the past decades that are aimed at transforming the nation from a socialist economy to a market economy. On 17 March 2016, China released its 13th Five-Year Plan (Plan) which sets out the guiding principles for China's development for the five-year period from 2016 to 2020. In the midst of the volatility of the stock market, the Plan stated that China will pursue stronger fiscal and taxation system reforms and strengthen the securities market. Unlike other developed OECD countries, China’s financial market is relatively new. Yet China is in a good position since it can learn from decades of overseas experience. Overseas experience suggests that financial system reform has to be supported by strong legal and taxation laws. Yet in China there are few rules governing the taxation of the sales of shares. This article looks at the taxation of capital gains (CGT) on sales of shares through a comparative analysis of the tax regimes in Australia and New Zealand. The analysis shows that there are many lessons China can learn from the CGT experiences of these two countries.
Copyright (c) 2018 Cassidy JULIE, HUNG MAN, CHENG ALVIN
Unitary Taxation with a Global Formulary Approach as a Realistic and Appropriate Option for Developing Nations: A Chinese Case Study
China’s transfer pricing regime and investigations into transfer pricing issues gained momentum in the late 1990s. Since then, China has indicated that it is of the view that because of its developing country status, with its unique economic and geographic factors, it faces a number of difficult challenges including a lack of appropriate comparables, quantification and allocation of location-specific advantages, and identification and valuation of intangibles. In the United Nations Practical Manual on Transfer Pricing, China highlights and expands its view on each of these challenges and of the four countries with commentary in Chapter 10, provides the most comprehensive discussion on the unique issues faced by developing and emerging economies. Interestingly, China goes so far as to mention formulary apportionment as a possible solution to the difficulties it faces in applying the arm’s length principle. Consistent with the concerns expressed by China, this article proposes that unitary taxation based on formulary apportionment should be considered as a more accurate method of determining China’s ‘fair share’ of profits to be taxed. There is already evidence that the current jurisdiction and allocation rules do not work for multinational entities and China has clearly expressed concern about the application of the current transfer pricing rules. As such, acceptance of an alternative model proposed as superior for multinational entities may not be as onerous as previously thought. To demonstrate this proposition the article establishes that a unitary taxation approach which reflects economic reality and is theoretically superior would, from a practical perspective, more easily and effectively ensure that the profits of multinational entities are taxed in the jurisdictions which give rise to those profits. In doing so, the article examines the commentary provided by China in the UN Practical Manual and compares that to Brazil, India and South Africa. It then considers the practicalities of the implementation of unitary taxation for developing nations in terms of the key components of such a regime arguing that it is a viable alternative to the current regime.
The Impact of Tax and Non-tax Policies on Adjusting Housing Prices in China
Chinese government has made many policies to adjust the development of real estate market in recent years. For the sake of researching on the policies effect, this paper divides all Chinese provinces into three regions according to Chinese government classification standard. Then the paper respectively analyse the notability degree which tax factor and five non-tax factors influence on housing price of three regions. These five non-tax factors include affordable housing, construction cost of residential housing, urban resident’s income, and loan scale. The paper appraises tax and non-tax policies effect, and gives some suggestions for the continued policies.
Copyright (c) 2018 Zhaohui LONG, BAO NING
Analysis of the Financial Function of the Real Estate Tax
By analysing the contribution of real estate taxes to local governments’ tax revenues in foreign nations, this article concludes that, as Chinese real estate market has been developing for many years, the existing properties and new properties provide abundant sources for imposing real estate tax, making it financially feasible to let real estate taxes play a dominant role in local revenue raising. As the reform on real estate tax involves an “infringement” of private property rights, when considering the factors in designing the framework, China not only have to consider the demand of raising revenue by the tax levier from a macroscopic perspective, but also examine whether a taxpayer is able to afford the tax financially and accept it politically from a microscopic perspective. Therefore the reform on real estate taxes should be a gradual process.