The head of China’s tax authority has spoken on the power of data to close loopholes and increase enforcement efficiency – also saying the country has an “urgent need” for updates in legislation to back it – as analysts anticipate a full digitalisation of invoices, or fapiao, this year.
China’s invoicing process is a crucial component of the country’s tax system. A fapiao is a legal receipt that serves as proof of purchase for goods and services.
“There is an urgent need to promote legislation in taxation at a higher level,” said Hu Jinglin, director of the State Taxation Administration (STA), in a commentary published Friday by the Study Times, the official newspaper of the Central Party School.
Additionally, Hu said, the administration will “accelerate the revision of tax collection and management, enhance the strength and precision of tax law enforcement, continue to publicise tax laws and use high-level law to help govern more efficiently.”
He also said data will be a key part of the enforcement strategy by aiding in “problem-solving, closing loopholes, risk prevention and enhancing efficiency”.
The biggest change is the sharing of information among various departments, and unifying tax data and management
Data sources will be broadened, Hu said, adding that it is important to improve data quality while making good use of existing resources. He emphasised raising the standard of tax management and law enforcement as China becomes more digitalised.
Hu said that there are “ideological misunderstandings” and “implementation deviations” in tax departments and vowed to strengthen supervision and governance, as well as “resolutely eradicate the conditions” for corruption by establishing stricter norms of behaviour.
While Hu did not elaborate on what tax categories would be up for legislation, of the 18 major categories currently in force in China, 13 already have laws specific to them, according to a research note from Galaxy Securities on July 4.
Hu’s commentary came amid growing expectations that China will roll out phase four of its Golden Tax System, a management structure first unveiled in 1994. The next phase’s focus is moving from an invoice-based procedure to one centred around big data.
“Digital fapiao is the core of phase four,” Galaxy Securities said. “The biggest change is the sharing of information among various departments, and unifying tax data and management so risk supervision for taxpayers can be implemented more accurately and comprehensively.”
The STA completed the development of the fourth phase in 2023 and is likely to fully promote the system this year, Galaxy Securities said.
“Online invoicing eliminates printing, stamping and mailing, which greatly reduces costs for enterprises and improves the efficiency of tax collection and management for authorities.”
China’s National Audit Office determined loopholes and oversights at customs and various tax departments had led to losses of 50.8 billion yuan in tax revenue, publishing its findings in its annual report on June 25.
