China Releases Circular to Crack Down on Tax Over-Collection

To standardize the law enforcement of tax collection and ensure the thorough implementation of tax policies, China’s State Administration of Taxation (SAT) issued the “Notice on Implementing the Inspection over Tax Collection on Individual Businesses (hereinafter referred to as the ‘Notice’)” on September 3, aiming to crack down on the over-collection of tax nationwide. Key provisions of the Notice can be found below.

Main contents for inspection

According to the Notice, the main contents for inspection include information on the following four aspects:
Administration of tax collection on an individual business

• Whether the policy on raising the value-added tax and business tax threshold for individual business has been earnestly implemented
• Whether the fixed quota verification procedure has been conducted according to the law, especially regarding the implementation of the disclosure and publicity system for fixed quota
• Whether there has been a raise of fixed quota at random
• Whether there have been acts of avoiding implementation of the tax threshold policy by changing taxation period, or in any other ways

Authorized collection

• Whether the procedures of authorized collection comply with relevant regulations
• Whether the rights and obligations of tax authorities and the entrusted collecting organizations have been clearly defined
• Whether the day-to-day management over the entrusted collecting organizations has been put in place, and whether the tax policies guidance has been conducted
• Whether the entrusted collecting organizations have randomly adjusted the fixed quota and illegally collected taxes

Compulsory taxation enforcement

• Whether the compulsory taxation enforcement measures have been conducted in accordance with legal procedure
• Whether the legal instruments on relevant tax affairs have been issued and used in a standardized manner
• Whether there has been expansion on the scope of the objects detained or sealed-up

Income of the organizations

• Whether tax collection has been conducted in accordance with the principle of “collecting taxes according to law, preventing over collections of taxes, and preventing and avoiding the reduction or exemption of taxes beyond their authority”
• Whether there have been acts of collecting taxes in violation of relevant regulations

The inspection consists of self- examination and rectification and key selective inspection, the former shall be completed before October 15, 2012, while the latter will be conducted from November 2012 to December 2012.
 

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