Page 8 - THE SOUTH CHINA BUSINESS JOURNAL
P. 8
EPTH
In June 2019, four central authorities – the People’s Bank of China (PBOC), the Ministry of Industry
and Information Technology (MIIT), the State Administration for Market Regulation (SAMR), and
the STA – jointly launched the Enterprises Information Online Verification System. The milestone
system allows tax bureaus, banks, and other institutions to verify the company’s tax information and
taxpayers’ business conditions through it.
It is expected that when the GTS Phase IV is online, the tax authority will be able to compare and
check the authenticity of the historical tax data submitted by taxpayers through the taxpayers’
bank accounts, bank accounts of related company personnel, related account data of upstream and
downstream companies, and revenue, costs, and profits of the same industry.
How will the Golden Tax System Phase IV impact enterprises?
In general, the Golden Tax System Phase IV will empower the tax authorities inspect not only invoices,
but also the enterprises’ business, capital, personnel, and other data. This will make it easier for tax
authorities to detect corporate tax evasion.
For example, some businesses use cash transfers from public to private accounts or from private-to-
private accounts to hide some of their income. These kind of tax evasion practices may be identified by
the tax authority with access to information from banks.
By incorporating the monitoring of social insurance contributions, the system will also promote
enterprises to fulfill their responsibilities of paying reasonable social insurance for their employees.
On the whole, the GTS Phase IV could make it easier to spot tax irregularities by the following
types of enterprises:
• Enterprises using false bank accounts
• Shell enterprises
• Enterprises with arrears of individual income tax (IIT) and social insurance premiums
• Enterprises issuing false invoices
• Enterprises with abnormal tax declaration
• Enterprises with a serious mismatch between its income and cost
• Enterprises whose inventory books do not reflect its actual inventory
• Enterprises with abnormal tax burden rates
• Perennial loss-making enterprises that do not fail
Enterprises must avoid becoming one of the above targets, which could well be inspected by the
tax authority.
Preparing for the Golden Tax System Phase IV
China is determined to build a smart tax system powered by big data, cloud, and AI technologies
within the next five years. Eventually, through information sharing and big data analysis, the tax
bureau may be able to obtain accurate a data portrait of every enterprise and individual taxpayer.
The tax bureau’s new concept of “managing tax through data” will undoubtedly bring new challenges
to the enterprises operating in China. In recent years, China’s tax authorities have achieved great
progress in the use of scientific and technological tools for tax administration, especially in the
management of VAT and IIT.
Although the GTS Phase IV will also need time to implement all the features, it is never too early for
companies to consider seeking professional tax advice to ensure they don’t run into any problems
when the GTS is upgraded.
5 AMCHAM SOUTH CHINA
In June 2019, four central authorities – the People’s Bank of China (PBOC), the Ministry of Industry
and Information Technology (MIIT), the State Administration for Market Regulation (SAMR), and
the STA – jointly launched the Enterprises Information Online Verification System. The milestone
system allows tax bureaus, banks, and other institutions to verify the company’s tax information and
taxpayers’ business conditions through it.
It is expected that when the GTS Phase IV is online, the tax authority will be able to compare and
check the authenticity of the historical tax data submitted by taxpayers through the taxpayers’
bank accounts, bank accounts of related company personnel, related account data of upstream and
downstream companies, and revenue, costs, and profits of the same industry.
How will the Golden Tax System Phase IV impact enterprises?
In general, the Golden Tax System Phase IV will empower the tax authorities inspect not only invoices,
but also the enterprises’ business, capital, personnel, and other data. This will make it easier for tax
authorities to detect corporate tax evasion.
For example, some businesses use cash transfers from public to private accounts or from private-to-
private accounts to hide some of their income. These kind of tax evasion practices may be identified by
the tax authority with access to information from banks.
By incorporating the monitoring of social insurance contributions, the system will also promote
enterprises to fulfill their responsibilities of paying reasonable social insurance for their employees.
On the whole, the GTS Phase IV could make it easier to spot tax irregularities by the following
types of enterprises:
• Enterprises using false bank accounts
• Shell enterprises
• Enterprises with arrears of individual income tax (IIT) and social insurance premiums
• Enterprises issuing false invoices
• Enterprises with abnormal tax declaration
• Enterprises with a serious mismatch between its income and cost
• Enterprises whose inventory books do not reflect its actual inventory
• Enterprises with abnormal tax burden rates
• Perennial loss-making enterprises that do not fail
Enterprises must avoid becoming one of the above targets, which could well be inspected by the
tax authority.
Preparing for the Golden Tax System Phase IV
China is determined to build a smart tax system powered by big data, cloud, and AI technologies
within the next five years. Eventually, through information sharing and big data analysis, the tax
bureau may be able to obtain accurate a data portrait of every enterprise and individual taxpayer.
The tax bureau’s new concept of “managing tax through data” will undoubtedly bring new challenges
to the enterprises operating in China. In recent years, China’s tax authorities have achieved great
progress in the use of scientific and technological tools for tax administration, especially in the
management of VAT and IIT.
Although the GTS Phase IV will also need time to implement all the features, it is never too early for
companies to consider seeking professional tax advice to ensure they don’t run into any problems
when the GTS is upgraded.
5 AMCHAM SOUTH CHINA
