Issuance Date: August 17, 2016 Source: General Office of the State Administration of Taxation
Since the 18th CPC National Congress, the CPC Central Committee and the State Council have taken deepening the administrative approval system reform as a key driver and starting point to accelerate the government function transformation, administration streamlining and power delegation. The Program for Deepening the Reform of State and Local Tax Administration System, issued by the General Office of the CPC Central Committee and the General Office of the State Council, makes a plan on the tax administrative approval system reform, requiring the implementation of the requirement of administration streamlining and power delegation, combination of centralization and decentralization, and optimization of services, and enhancement of ongoing and ex-post management. In recent years, the State Administration of Taxation (SAT) has adopted a three-faceted approach of "delegation, centralization and service" to deepen the tax administrative approval system reform, optimize taxpayer services, ease burdens on enterprises, make use of the role of markets, yield the dividends of reform, revitalize the market and ensure robust economic development, which has delivered tangible outcomes.
Breaking new ground in decentralization, with efforts stepped up on administration streamlining and power delegation
Tax authorities, the administrative law enforcement authorities directly under the Central Government or local governments, were baffled by too many approval matters and links in the past, which constrained the efficiency of tax collection services and weighed taxpayers down.
"The reform is now at a critical moment for the shift from increment reform to stock reform. Slashing administrative approval is just a move towards the stock reform." At this stage, we are tasked to address tough issues, said Yan Jirong, executive deputy dean of the School of Government at Peking University.
To this end, the SAT has deepened the tax administrative approval system reform since 2013, developing a full understanding of the current state of approval, publishing a list of 87 tax administrative matters, adopting directory management for taxation administrative approval, comprehensively streamlining non-administrative permission, and slashing or handing down administrative approval matters, to make sure everything to be delegated is delegated. So far, except 7 approval matters retained, 80 matters have been streamlined, including 57 canceled and 23 adjusted to ones subject to management by other authorities.
- Removing high thresholds to provide taxpayers with smooth access to tax processing. The SAT will no longer handle non-administrative license approval items such as verification of tax registration, confirmation of consolidation of levying period for remote areas, recognition of qualification for export tax rebates (exemptions), in an attempt to lower relevant tax thresholds. At the very beginning of 2016, the SAT promoted nationwide the Code of Export Tax Rebates (Exemption) Management (Version 1.1), to further delegate approval powers, handing down refunds to productive enterprises that are easy to manage and easy for collection-refunding connection to local county (district) state tax authorities for approval, except refunds to complex foreign traders, and canceling approvals by city and county tax authorities, and even giving taxpayers with good tax credit access to refunding before approval. By maximizing convenience, the SAT has effectively lowered the threshold to approval for refunding. "The refunding that took more than a half month in the past takes less than a week now," Ms. Sun, VP at Qingdao Cherry Group gave the thumbs up to the much faster export tax rebate by Qingdao Provincial Office, SAT. "Calculated by last year's refunds, we will save more than RMB 1.2 million in operating costs one year from the speed-up."
Since the going-global strategy, especially the Belt and Road Initiative, was implemented, a growing number of enterprises and individuals have carried out investing and operating activities overseas, leading to a remarkable increase in the number of applicants for the Certificate of Chinese Fiscal Resident ("Fiscal Resident Certificate") to access preferential treatment provided in tax treaties or conventions. On June 28, 2016, the SAT issued a circular to delegate the power to issue the Fiscal Resident Certificate from city-level to county-level tax authorities, delegate the power to confirm grade, and simplified required submissions such as canceling the tax clearance certificate previously required, to make sure enterprises and individuals going global have better access to preferential treatment set forth in tax treaties or conventions.
- Avoiding repeated visits to ensure one-stop tax processing. The SAT has launched a series of measures to streamline administration and delegate powers, including the "accountability list", the first-inquiring responsibility system, and further refining the position responsibility system with regard to approval powers, in a bid to ensure no barriers against tax processing and approval.
A shift from government provision to public demanding is the direction of deepening administration streamlining and power delegation. The SAT requires solicitation of public ideas in formulating department regulations and developing tax regulatory documents, identification of the obstacles, pain points and difficulties encountered by taxpayers, and collection of their suggestions on improvements, and closely connecting the building of a position responsibility system with taxpayer demand, thereby effectively enhancing public engagement. State and local tax authorities in Xindu District, Chengdu, Sichuan Province jointly published their power and responsibility lists, and drew 18 external flow charts with regard to administrative power, achieving full transparency of its power list and enabling taxpayers to clearly understand what is to be done in the course of tax processing.
Previously, to establish a new company, its employee has to visit the industrial and commercial authority to obtain a business license, the tax authority for a tax registration certificate, and the Quality and Technical Supervision Bureau for a certificate of organization code. This has changed now. The SAT introduced in December 2014 the Opinions on Advancing Three-in-one Reform of Business License, Certificate of Organization Code and Tax Registration Certificate, to promote "three-in-one" certificate and explore the "unified code" in the tax system. The three-in-one certificate with a unified code was launched nationwide on October 1, 2015. Taian City of Shandong spent an average of 4.4 hours in the process ranging from verifying the business license to processing the tax registration certificate; Hengqin New District of Guangdong realized simultaneous approval through the connected web, and reduced 969 times of applications and 4,845 copies of submissions in 2 weeks alone.
The SAT also has been committed to streamlining documents that are outdated and unfavorable for one-time tax processing, and publishes them in time to satisfy taxpayer demand to the utmost, in a bid to enable them to understand tax for efficient processing. "Where the tax authority is located, what should be brought along, and whom to meet for tax processing - all are set forth in the announcement, saving the need to ask others and look for here and there. This offers great convenience to us taxpayers." Qin Xue, accountant at Zhaoyuan Tianqiao Flour Co., Ltd., expressed her satisfaction with the approval announcement by Shandong Zhaoyuan State Tax Bureau.
- Slashing unnecessary links in the process to give taxpayers direct access to responsible authorities. The SAT delegates the approval power with regard to matters that were previously subject to approvals by authorities at different levels, such as "verification of taxpayer's delayed payment of taxes", and "approval of a non-resident enterprise who chooses its major organization to pay corporate income tax" to the authority who made the decision of permission for direct approval based on the principle that "whoever implements should be responsible for approval", thus deeply cutting middle links and enhancing the administrative approval efficiency.
To standardize administrative approval, the SAT changes canceled administrative approval into filing management, optimizes filing procedures and simplifies filing materials. For example, the Circular of the State Administration of Taxation on Issuing the Measures for Processing Matters Eligible for Preferential Treatment with Regard to Corporate Income Tax, clarifying that approvals for matters eligible for preferential treatment with regard to corporate income tax are to be canceled. In the taxpayer service hall of Jiangxi Yongxiu County State Tax Bureau, Yu Liang, accountant at a small and micro enterprises, said, "It was tedious to handle procedures for enjoying the preferential policy on corporate income tax, and the amount of exemption was small, so many enterprises gave up their rights to enjoy the preferential policy. But now, approval and filing are no longer required from small and micro enterprises for tax reduction and exemption, and there is a green channel without requiring queuing, which makes processing fast and convenient."
Starting from last March, the SAT has simplified filing procedures for small and micro enterprises to enjoy tax preference, and taxpayers only need to go through filing procedures by filling out the tax return, without completing extra filing procedures. "VAT preference requires no application or filing procedures either, but direct declaration of tax exemption, which lowers processing burdens on small and micro enterprises, and arouses their enthusiasm for enjoying tax preference. Currently 100% of the small and micro enterprises in Kaifeng benefit from the preferential policy," said Li Tao, director of Kaifeng Municipal Office, SAT.
Strengthening regulation to explore new models for ongoing and ex-post management
"Delegation is not indulgence, but to make room for intensified regulation. Effective and efficient regulation ensures a high level of liberalization and deeper cuts," said Premier Li Keqiang. "Efforts should be made to make ongoing and ex-post regulation more relevant and effective, so as to revitalize the market, instead of throwing it into chaos."
Delegation is necessary, but seizing the delegated power is more important. While delegating powers, the SAT does not delegate the responsibilities, in a bid to ensure "practical delegation, smooth takeover and efficient regulation" and effectively intensify follow-up regulation, by seamlessly transforming from cancellation of approvals to ongoing and ex-post regulation. In February 2016, the SAT issued the Guidance on Deepening the Reform of Tax Administrative Approval System to Effectively Strengthen Interim and Ex-post Administration, so as to refine the ongoing and ex-post management system, and implement the "Internet + tax" action plan based on big data and tax risks management to boost shared management and governance among the general public.
- Refining management system to standardize tax administration. First, efforts have been made to make tax policies more certain and coordinated, implement the rule of law, and refine the coordinated mechanism to ensure smooth transition amid policy adjustments. Second, management measures are being made more relevant and effective by tracking and assessing the implementation results of the follow-up management measures after administrative approval matters are canceled or handed down and timely adjusting the measures in practice. Third, efforts have been made to ensure measures are developed in a more scientific and democratic way by improving the policy drafting, proving, coordination and review mechanism, and implementing the mechanism to solicit ideas from grassroots tax authorities so as to prevent department dominance with regard to policies and measures. To refine systems, the SAT optimizes management, intensifies tax return filing management, steps up comparison between basic tax administration information and tax return information, standardizes record filing management, promotes double record filing of tax authorities and taxpayers, and gradually rolls out online record filing. To refine management measures, tax authorities in many regions such as Beijing, Jiangsu, Guangdong, Jiangxi and Henan have launched the real name system for tax processing and promote IT-based and retrospective follow-up management, which have produced positive results.
- Promoting "Internet + tax" through technologies. In recent years, the SAT has extensively used "Internet + big data" to promote the risk management coordination system for risk management exposure, and build and refine the tax risk feature library and the analysis and recognition model, adding tools for IT-based tax risk prevention and control. The SAT has assigned tax risk analysis and response tasks with regard to 3 batches of 1,000 groups in China, with the first batch of 71 risk points alone contributing RMB 925 million to verified payments of overdue taxes.
Ms. Yu from Cixi, Zhejiang received a risk notification call from Xiaolin Branch that four invoices of her company were suspected of being runaway invoices according to the back office big data-based comparison and may incur over-invoicing risk. As at the end of this April, Xiaolin Branch initiated 128 risk investigations through the risk monitoring system and collected tax arrears of RMB 1.5189 million therefrom.
The new VAT management system has been promoted in an all-round way, with all the information on the invoices issued by taxpayers acquired and all the information on electronic ledgers displayed, which create new opportunities for incorporating existing VAT management into "Internet+" thinking. Moreover, the SAT has launched a pilot program of electronic invoices nationwide, in a bid to achieve Internet-based operation of all invoices and strengthen the capabilities of data analytics and risk tackling via IT system reconstruction.
- Promoting shared tax governance, avoiding solo play. By publishing the red and black lists, the SAT is committed to connecting tax data with social credit for shared governance with respect to tax administration.
Qingdao Provincial Office, SAT, Qingdao Local Tax Bureau, Qingdao Bureau of Finance, and Qingdao Industrial and Commercial Bureau have jointly built the Tax Source Monitoring Mechanism for Shareholders' Equity Changes, for the purpose of sharing information on equity changes. Tax authorities have so far accumulatively obtained 16,440 pieces of equity transfer information from industrial and commercial authorities. In the first half of this year alone, RMB 45.10 million in taxes were submitted into the treasury after assessment based on the mechanism, hence effectively avoiding losses of taxes on gains from overseas transfers and safeguarding the country's tax rights and interests. Shandong Tengzhou Municipal People's Government took the lead in building the "information platform for shared tax governance" so that all departments work together to jointly push forward tax risk prevention and control.
Tax authorities have launched the credit incentive program of "mutual recognition of credit level and interaction between tax authorities and banks", benefiting creditworthy enterprises, especially small and micro enterprises. For its sound tax credit, Industrial Bank issued a credit line of RMB 50 million to Fujian Yaheng Power Technology Group Co., Ltd., an SME engaged in manufacturing lithium batteries and electrical machinery, in addition to providing a package of listing plans, and has accumulatively issued the Company credit loans of RMB 44.82 million. "Lack of funds and a constrained platform have long inhibited its scale expansion and business diversification. But class-A tax credit has helped us a lot. I would like to give the thumbs up to banking-taxation interactions," Mao Jianren, head of the Company, said with great joy.
Making innovations to push taxpayer services to a new high
Functional transformation, administration streamlining and power delegation would ultimately be reflected on the ramp-up of tax processing efficiency. The SAT has started from public demand, with focus on overcoming weak links and solving major problems, in an attempt to provide the public with quality public goods and efficient public services. In November 2015, the SAT issued the Opinions on Standardizing Administrative Approval Conduct to Improve Administrative Approval, raising requirements in ten aspects such as tax authorities at various levels to launch one-window processing, accelerate online processing, and make commitment to processing timeframe, in a bid to bring optimization and acceleration of tax approval services, and improvement of service efficiency onto fast track.
- One-window processing for major regions, avoiding visiting many authorities. One-window processing has been initiated, which, coupled with convenience measures such as deepening cooperation between state and local tax authorities, and intra-province processing, has fundamentally solved the problem of visiting many authorities. On the first day after Chongqing Municipal Office, SAT announced intra-city processing of tax-related matters, 35 district and county taxpayer service halls handled 4,570 intra-province transactions, offering great convenience to taxpayers doing cross-regional businesses. Hubei Nanzhang County Taxpayer Service Center established an front window and back office integration mechanism, enabling onsite interfacing between front office and back office for any window business, to ensure solutions to business problems in the first place.
- Trimming approval procedures to make it easier to enjoy preferential treatment. In February 2016, the SAT published the Announcement on Tax Administrative Permission, to simplify and standardize all links of the 7 retained tax administrative approval matters, with focus on pushing forward process reengineering of approvals, straightening out responsibility management, and addressing fragmentation of the previous approval system. Meanwhile, the SAT is committed to promoting the acceptance sheet system nationwide, and has developed a common approval matters acceptance sheet sample. Those involving tax preference have been simplified, so that enterprises could enjoy the dividends of reform in the first place.
"Once qualified, taxpayers can enjoy preferential treatment in filing a quarterly tax return, and undergo record filing with the tax authority in annual clearance, which is very convenient." Li Jin, financial head at Triplex International Biosciences (China) Co., Ltd., said, "Last year, we enjoyed RMB 3.5 million in tax preference, which was honored in the first place, allowing us to invest more in new products R&D."
Given tedious procedures, heavy review workload, and low voluntary application of taxpayers in the payment of service fees for withholding and remitting taxes, collecting and remitting taxes and entrusted collection of taxes ( “three agency charges” for short), Guangzhou local tax authorities have combined 7 approval links into one submission link, and proactively push the information through the electronic taxpayer service hall. Taxpayers only need to check and confirm the information, instead of making applications themselves and submitting paper materials, and the generation, review, confirmation and payment of the three agency charges are completed in the electronic taxpayer service hall.
- Completing approvals within the statutory timeframe to ensure timely services. In July 2016, the SAT issued a circular on enhancing administrative approval management to ensure all approvals are completed within the statutory timeframe, requiring adoption of the timeframe commitment system. To be specific, approvals that can be conducted onsite in a simple procedure should be handled immediately, while for matters that involve field investigation, reporting to the higher authority, etc., a timeframe for settlement that is not longer than the time stipulated by laws and regulations should be noted in the acceptance sheet. Following this requirement, tax authorities at various levels have built green channels for special preference approval, to cut the time for approval further and make tax processing easier and faster. Gansu Provincial Office, SAT complies with the requirement for classified management of export tax rebates to complete in 5 working days tax rebate or exemption filed by eligible class-A exporters.
- Introducing innovative measures to support the development of free trade zones. The SAT, following national strategies, innovates the service model to support the development of enterprises.
In Shanghai Pilot Free Trade Zone, tax authorities have established a system of the approval-free preferential tax policy enjoyment list, allowing eligible taxpayers for tax reduction and exemption policies on the list direct access to the preference after voluntary filing of a tax return. This has further strengthened the implementation of technology innovation-related tax preferential policies, and solved the last mile problems in policy implementation.
Over the year since Nansha Pilot Free Trade Zone was launched, Guangzhou local tax authorities have introduced 20 measures for building the free trade zone with innovative services. It was the first to launch innovative measures such as voluntary filing of tax returns, and regulation after processing to build a brand for special taxpayer services, shape the new tax management model in the free trade zone, accumulate Nansha Experience with the characteristics of the zone and provide numerous taxpayers with more quality taxpayer services featuring international elements, market orientation and rule of law.
Moreover, the SAT has imposed specific requirements on refining the exercise of discretion, built approval matter processing records and liability system, enhanced the transparency of administrative approval, and established applicant review system, so as to vigorously push forward standardization and improvement of administrative approvals in a well-organized way and promote the enhancement of taxpayer services and tax administration.
Deepening the administration streamlining and power delegation is not an expedient but will benefit this and future generations and therefore is of great significance and will play a crucial role. Deepening the tax administrative approval system reform shows the courage of tax officials to reform and is even a solemn commitment to taxpayers. It can provide a strong support to the healthy development of the market and will make a contribution to building a fair and just environment for economic development.