Journal of Chinese Tax and Policy - Volume 1(1) August 2011
The Coming of Age of Enterprise Taxation in China
By Natalie P Stoianoff
This article commences with a brief historical overview of the taxation system in China and provides a context for the key elements relevant to foreign enterprises since the Open Door Policy. The unified taxation of domestic and foreign-owned business enterprises recognises the maturity of China's economy and the greater role that domestic enterprises are playing in the world economy and, consequently, the need to ensure competition is on a level footing. However, the primary concern of this article is to provide an analysis of the 'principles based' unified enterprise income tax regime that commenced operation on 1 January 2008 together with its implementing regulations. This analysis reinforces China's integration of western tax concepts albeit in a much simplified manner than most economically-developed regimes. However, the unified regime does pave the way for China to utilise the benefits of that unification to enable development of better wealth distribution throughout the nation and thereby enhance economic development.
This article also demonstrates that domestic businesses were at a disadvantage before this unification and that disadvantage led to behaviour that sought to circumvent the disadvantage by utilising the loopholes available between the Domestic and Foreign Enterprise tax rules. The article concludes that this reform is as much an attempt at ensuring competition is equal between domestic and foreign sectors of the Chinese economy as it is about dealing with tax avoidance. The introduction of specific and general anti-avoidance measures is evidence of this dual purpose. It is perhaps too early to judge the performance of this new regime, but once the grandfathering arrangements come to an end, the true impact of the unified Enterprise Income Tax Law will become apparent.
Characteristics of the Chinese Tax System and Its Cultural Underpinnings: A Comparison with the West
By Bin Yang and Eva Huang
China's tax system is characterised by the co-existence of formal taxes, sundry levies and hidden taxes. In China, multiple authorities with tax law-making powers and tax administration powers exist. This leads to issues of tax jurisdiction and tax compliance such as differential treatment between local administrative areas and between taxpayers who have different status in the tax system. These unique characteristics of the Chinese tax system are rooted in China's special national circumstances. These national circumstances include issues of economic development, political system and issues that are culturally specific. Further, a 'human relationship system' arises from that culture, where the behaviour of politicians, grassroots administrators and the taxpayers cannot be viewed in isolation. Looking deeper, the reasons behind these characteristics relate to the status-conscious culture in China. This is exemplified in the saying 'Criminal punishment does not apply to senior officials and the etiquette does not apply to common people' , and the selfish culture of human sympathy, face relationships, and 'if it is not my business, hang it up'.
Real Estate Tax (RET) of People's Republic of China
By Luo Yang
This paper examines the trial implementation of the Real Estate Tax in Shanghai through analysing its effects on housing price, its effects on the rigid demand of housing and on housing as an investment option. It also identifies a few reform options if the government chooses to implement the Real Estate Tax as a policy to control housing prices.