Deloitte 2015 “Rule by Law in Taxation” Forum

Published: 27 October 2015

Deloitte China successfully concluded its inaugural "Rule by Law in Taxation" Forum today in Chongqing themed "Taxation By Law And Enforcement Of Good Laws In Good Faith". Leading scholars, seasoned practitioners from tax and legal profession, tax officials and senior corporate executives attended the Forum and discussed vigorously China's tax reform within the framework of "rule by law" and China's progress of rule by law in taxation in the emerging domestic and overseas landscape.

“Fully advancing the rule by law in taxation reflects and aligns with the overall strategy of rule by law in the nation, and is a priority in realizing tax modernization. As an active participant in China's tax practice and taxation system, Deloitte created this platform for experts from academia, legislation, enforcement and practice circles to exchange insights on the rule by law in taxation, debate what good legislation and governance is, and put forward recommendations for further tax modernization. As a leading professional tax service provider, Deloitte observes that tax and legal should become two in one on many fronts, from promoting taxpayers' compliance, creating values in a changing economic environment, developing future talent together with educational institutions, and all the way to advising on tax system reform as think-tanks. Only by combining these two could we achieve the vision of rule by law in taxation and exerting good governance,” said Vivian Jiang, Country Leader for Tax and Business Advisory, Deloitte China. “Deloitte values building legal insights and skills for our tax team. In addition to attracting lawyers to join our team, we encourage the analytical approach in our practices, which traces back to the parent law for appropriate solutions. Such approach not only helps our clients address tax issues, and at the same time, enables our professionals with tax background to develop capabilities to decipher tax issues from the legal perspective as well as allows professionals with legal background to acquire business, finance and accounting knowledge and skills through tax practices. Currently Deloitte has around 100 tax lawyers with Chinese or overseas qualifications. Our strong team of tax lawyers will be at the forefront in promoting the rule by law in taxation."

Currently, among China's 18 existing taxes, only three - individual income tax, corporate income tax, and vehicle and vessel tax - are levied through legislation, while the others are imposed through formal or provisional regulations issued by the State Council. As fully advancing taxation by law becomes a key agenda item in the 13th Five-Year Plan, legislative reform in finance and taxation area is imperative, along with standardization and streamlining in enforcement and implementation. Professor Liu Jianwen from Peking University Law School who is also the President of China Association for Fiscal and Tax Law, presented at the Forum and delivered a keynote speech titled "Tax Reform within the Framework of Rule by Law". A panel discussion followed with Deloitte China Tax Partner Martin Lin as the moderator. Panelists included Nora Fu, Shanghai Qin Li Law Firm Partner, Song Jinxiang, Director of Income Tax Division in Chongqing Municipal State Tax Bureau, Zhu Yide, Chief Judge, Administrative Division of the People's Court in Yubei District, Chong Qing Municipality, and Deloitte China Tax Director Hal Davis. Professor Liu Rong from School of Public Finance and Taxation of Southwestern University of Finance and Economics and Mr. Wang Biwei, Partner of Zhonghao Law Firm (Chongqing office) who was the former Vice-president of the Administrative Tribunal of Chongqing Intermediate People's Court also shared their points of view during the discussion.

Professor Liu Jianwen, President of China Association for Fiscal and Tax Law and a faculty member of Peking University Law School commented: "the on-going tax reform under the legal framework is one of the critical initiatives to further enhance the State governance. It has been realized that many tax specific issues are in fact driven by fiscal revenue considerations. Indicated by the experience gained from the last thirty years of reform, a big progress has been made by shifting the focus from Rule of law to Rule by Law, and Rule by Law should be the direction, the guidance, and the ultimate goal of our tax reform. I'm glad to see that Deloitte was the first among the Big Four accounting firms to create a platform discussing Rule by Law in Taxation and to come up with the topic of Enforcement of Good Laws in Good Faith, which is very meaningful." He elaborated that good laws shall be generally applicable to and largely supported by public, while Enforcement in Good Faith provides a balance between tax authorities and taxpayers. Due to its impact on both the State interests and individuals' interests, Rule by Law in taxation is so important that should become a principle guiding the nation fiscal revenue management and a "secret" to build greater strength of the country.

Deloitte Tax Partner Martin Lin moderated the panel discussion, using real cases to facilitate interactions and sharing of insights. He commented that "collecting tax under law and paying tax in accordance with law are like two sides of a piece of paper. The two of them are interconnected, and both are critical in advancing the Rule by Law in Taxation in China. In practice, it is important that accountants, tax specialists, and lawyers work closely together, bringing in multi-dimensional perspectives from economics, jurisprudence, and public administration. That is why we increasingly favor the "tax + lawyer" approach in honoring our responsibilities as corporate citizen and tax consultants and in contributing to the Rule by Law in Taxation."

Nora Fu, Partner of Qin Li Law Firm, with years of experiences in the legal area, echoed Martin's comment on tax lawyer: "Realization of taxation by law lays not only a cornerstone of Rule by Law in Taxation, but also a challenge for all the stakeholders in China's tax system to achieve Rule by Law in Taxation. Tax lawyers are expected to act as the bridge between tax payers, tax officers and tax judges, coaching the former with a growing sense of compliance and urging the later to enhance taxation by law and trial in accordance with law, and through participation in the legislation of taxation to become the agents blessed by the social forces to pursue Taxation by Law."

Deloitte plans on turning this Forum into an annual event, inviting leading experts to exchange insights on the most discussed topics of the year on the rule by law in taxation with a special focus on practical matters. Deloitte also envisions the platform be a conduit to relay suggestions and recommendations to legislative bodies to promote the rule by law in taxation.