State Council Proposes Merger of China’s Tax System


Analysts say that the Chinese government’s plans to consolidate tax administration mark the biggest reform of the country’s taxation system since the mid-1990’s.

The administrative reform plan submitted by China’s State Council to the 13th National People’s Congress on 13 March outlines far-reaching reforms of China’s state and local taxation system, chief amongst them the merger of state and local taxation authorities at the province level and below.

The merger will see the creation of a taxation system which is jointly led by the State Administration of Taxation and China’s province-level governments.

Experts point out that the move is the biggest reform of China’s taxation system since 1994, when central government and local government finances and taxes were first divided.

“The merger of state and local taxation at the province level and below the province level is a fundamental reform of China’s tax administration system, and necessary for the development of the tax administration system in a new historic era” said Zhang Yiqun (张依群), head of the Jilin Province Fiscal Science Research Institute, to Securities Daily.

“It will have a positive driving role for further strengthening the collection channels of taxation agencies, raising the efficiency and quality of collection, economising on tax collection costs, and unifying the tax collection administrative system.”

Zhang points out that the tax collection ability of local tax departments has been weakened by the cancellation of the business taxes that were its main form of levy.

According to Zhang efforts to ensure the smooth implementation of policies for replacing businesses taxes with value-added taxes prompted state taxation and local taxation authorities in some areas to merge their offices, laying the foundation for reforms now being mooted before congress.