China's Tax Reform Ignites Worldly Attention
Deloitte Global Tax and Legal Leadership Conference Held in Shanghai
Published: 17 March 2016
Deloitte Global Tax and Legal Leadership Conference (GTLLC), under the theme: "Living our purpose, achieving our aspiration", concludes today with the attendance of nearly 300 global tax and legal leaders in Shanghai. In addition to focusing on the evolving taxation and business environment and policies in both China and global, the Conference also explores a wider portfolio of topics including tax technology, innovation on the leading edge, and cross-border collaboration. During the conference, there were a number of interactive sessions with clients to explore the future advancement of tax and business services. At the three-day conference, attendees explore how to press ahead in an ever-changing global economy and business environment, how to lead the transformation of tax and legal industry, how to guide our clients and staff through the unprecedented changes and conclusively redefine the tax and legal client experience in this new dawn.
As the Fourth Session of the 12th National People’s Congress and the Fourth Session of the 12th Chinese People's Political Consultative Conference (NPC & CPPCC) came to a successful conclusion earlier this week, areas covering almost all of the national economy, such as the macroeconomic regulation, reform and implementation of the fiscal and taxation system, innovation driven development strategy, the latest high-level of opening up, are believed to get pressing ahead in a refreshed manner. At this very moment, the objective of hosting the Conference is to allow the attendees to experience and witness the Chinese economic environment and discuss hot tax and legal topics from different angles. This is the year that G20 Summit will be hosted in China. It is also the year that China will be hosting the 10th Meeting of the Forum on Tax Administration (FTA). Deloitte's GTLLC to also take place in Shanghai is never a coincidence but implies enlightening significance.
Against the backdrop of the world economy going through comprehensive adjustment with increasing uncertainty, China as the second-largest economy attracts global attention to its economic trend as it steps into the first year of its "13th Five-year Plan". Some of the foreign media comment that China’s economy will set a tone for the global development while China has proposed in the outline of "the 13th Five-year Plan" that China will actively participate and improve its institutional voice in global economic governance.
How to deepen and advance tax reform in a steadily transforming and upgrading economy so as to optimize resource allocation, maintain market unity, and promote social equality? What kind of active roles should be played by the government, tax payers and professional service providers? According to Albert Baker, Deloitte Global Tax Policy Leader, "We are seeing unprecedented changes in international tax law around the world often resulting in the potential for double taxation or double non-taxation. This has created a lot of uncertainty for all stakeholders. There is a compelling need for multinationals to get in front of this to assess their current position, make changes where necessary and plan for the future. There is also a compelling need for governments to be better coordinated and make the necessary investment in the areas that would help resolve tax disputes in a more efficient manner." As a world-leading professional service firm, Deloitte has always been a supportive practitioner of tax reform in China as well as around the globe.
For example, China proactively participates in the Base Erosion and Profit Shifting (BEPS) initiative as a cooperative partner of OECD, and China's State Administration of Taxation revealed that it has proposed more than 1,000 pieces of position statements and suggestions to OECD, many of which have been reflected in the final deliverables of BEPS, contributing to the formulation and reset of international taxation scheme.
Deloitte's Managing Partner for Eastern China Tax and Business Advisory and National Leader for Transfer Pricing Services Ms. Eunice Kuo, said that her team has launched a survey at the beginning of 2016 to pave way for the roll-out of BEPS in China and facilitate the change in perception of the operation and tax management of multinational companies. According to the survey conducted via the Deloitte China Tax Conference, nearly 70 percent of the participants reckon that their understanding of BEPS is "preliminary", yet 85 percent of the correspondents recognize that BEPS will exert a "sizable, if not huge" impact on their cross-border operations. In view of this, Albert and Eunice suggest both foreign and Chinese companies doing business globally to assign adequate priority to understand the new international tax regulations, re-evaluate their existing business model, transfer pricing policies, compliance mechanism and risk management system. Last but not the least, companies should leverage technology-enabled tools to manage various tax issues in a legitimate and reasonable manner.
Tax-related topics have been under the spotlight throughout the Two Sessions of the NPC & CPPCC. The VAT Reform to be fully rolled out on 1 May, as well as the individual income tax (IIT) and the property tax which are still in legislative commencement phase, have all received wide public attention due to their direct and wide influence. Speaking of the impacts of VAT Reform on related industries, Ms. Liqun Gao, Indirect Tax Services Regional Leader of the Eastern Region of Deloitte China, said that VAT Reform is a critical measure to further stimulate the economy, and plays a significant role in eliminating repetitive taxation and streamlining the whole supply chain. In the long term, the VAT Reform, in line with the structural tax reduction scheme, will definitely create benefits for all industries, just as Premier Li Ke Qiang's has asserted, the tax burden of all sectors will be alleviated. Companies are suggested to closely monitor the details upon the release of the VAT Reform regulations, and meanwhile, evaluate the potential impacts on their business models with the assistance from professional service providers, and get prepared for a smooth transition within the limited timeframe.
As for IIT reform, Ms. Vivian Jiang, National Leader of Deloitte Tax & Legal said, "IIT reform should not be limited to raising the exemption threshold. Instead, the focus should be the overall reform objectives and the root for legislation under the new economic circumstances. The preparation of tax return on a family basis, coupled with the broader range of pre-tax deductions, can be fundamental steps tying into rational redistribution of individual income, livelihood improvement, consumption enlargement, social fairness and other reform objectives. Moreover, this round of IIT reform is anchored upon the monitoring of diversified source of income, effective tax collection, and infrastructure support from a well-developed technology platform. The most challenging part lies in how to materialize the blueprint and implement the policies." From Vivian's points of view, although the VAT and IIT reforms indicate China's comprehensive tax reform has hit the road, and the great prospect embroidered by tax legislation and rule by law in taxation is what she truly expects.
Currently, among the 18 existing taxes, only three - corporate income tax, individual income tax, and vehicle and vessel tax are levied through legislation, while the others are imposed mainly through rules and regulations issued by the State Council. It is believed that after the Two Sessions, there will be significant progress in tax legislation. 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 to realize tax modernization. Rule by law in taxation helps to streamline the complicated relationships among different stakeholders, and serves as a common base for fiscal and tax reform. Taxpayers' activities need to be ruled by law, and all the legislation and decision-making of the government should also be conducted under the framework of law. With such beliefs and expectations, Deloitte successfully held the inaugural "Rule by Law in Taxation" Forum themed "Taxation By Law and Enforcement of Good Laws in Good Faith" in October 2015, and supported the "2015 China Tax Law Forum and the Fourth China Tax Lawyer and Tax Agent Forum" as one of the co-organizers, discussing 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. Along the journey Deloitte has become a determined and vigorous promoter and doer to advance taxation by law.