{"id":9379,"date":"2022-01-31T07:30:36","date_gmt":"2022-01-31T07:30:36","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=9379"},"modified":"2025-04-23T09:45:18","modified_gmt":"2025-04-23T09:45:18","slug":"tax-in-china-in-the-age-of-common-prosperity","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/tax-in-china-in-the-age-of-common-prosperity\/","title":{"rendered":"China’s tax policy in the age of Common Prosperity"},"content":{"rendered":"

Chinese tax authorities have vowed to crack down on tax evasion by celebrities and online influencers such as <\/span>Fan Bingbing and <\/span>Viya, but they’re also keen to reduce taxes and fees for businesses and SMEs, writes Torsten Weller<\/strong><\/span><\/h2>\n

One of the most visible expressions of China’s new \u2018Common Prosperity<\/a>\u2019 policy has been the stricter enforcement of individual income tax violations. In December 2021, Chinese tax authorities fined live-streamer Huang Wei \u2013 also known as Viya \u2013 the record sum of RMB 1.34 billion (around \u00a3186 million) for non-payment of individual income tax (IIT). This is the largest fine since Fang Bingbing, a movie star, was ordered to pay around \u00a3100 million for the same offence in 2018.\u00a0<\/span><\/span><\/p>\n

At a meeting earlier this month, Wang Jun, the head of the Chinese state tax administration (SAT) vowed to \u201cpunish severely all kinds of tax evasion and show no forgiveness.\u201d Somewhat contradictorily, Chinese authorities also said in December that they would show leniency to live streamers<\/a> who settled their outstanding tax payments voluntarily before the end of 2021. Wang even announced that SAT would implement a policy to exempt first-time offences. At the central government level, the message about IIT is equally equivocal.\u00a0<\/span><\/span><\/p>\n

\"launchpad<\/a><\/p>\n

At the Central Economic Work Conference in December, Chinese leaders repeated their promises to further reduce taxes and other fees. In total, the financial burden on businesses will be reduced by RMB 1.1 trillion (\u00a3139 billion) in 2022, following a similar reduction the previous year. The government also announced that it would maintain tax benefits for \u2018talents\u2019 and highly educated employees. Beijing even extended \u2013 at the last minute \u2013 a tax exemption on fringe benefits for expats<\/a>.\u00a0<\/span><\/span><\/p>\n

While China\u2019s stoic adherence to supply-side policies might be good news for companies and foreign employees, the tightening control and increasing use of big data by Chinese tax authorities also requires a far more circumspect approach to Chinese operations.<\/span><\/p>\n

Background\u00a0<\/span><\/span><\/h4>\n

China\u2019s tax system for individual incomes has undergone several important reforms over the last couple of years. Most of the changes have been aimed at improving tax compliance and the SAT\u2019s own efficiency. China\u2019s fapiao<\/em> reform in 2017 \u2013 following the introduction of a nationwide VAT a year earlier \u2013 targeted widespread tax fraud which relied on false invoices (called fapiao<\/em>) to skirt IIT obligations.\u00a0<\/span><\/span><\/p>\n

Tax authorities also expanded their online tax platform \u2013 the \u2018Golden Tax System\u2019. Initially designed to process VAT invoices, the system has expanded over the last couple of years, including ever more data. Importantly, it has also served as a tool to integrate tax files from different tax offices. Previously, each tax bureau had its own independent reporting system, requiring companies to de- and re-register their tax records if they wanted to move offices from one district to another. The latest expansion \u2013 called \u2018Golden Tax IV\u2019 \u2013 which will go online this year, not only increases tax sharing capabilities between local and state levels, but also monitors non-tax contributions, such as social insurance fees.\u00a0<\/span><\/span><\/p>\n