Foreign workers offered a way out of tax trouble
The mainland government will offer foreign workers a one-off chance to clear up personal income tax arrears this year without incurring hefty penalty payments.
The administrative concession recently approved by the State Council promises to improve enforcement of personal income tax with minimum disruption to companies' operations and cash flows, according to Ernst & Young tax partner Joseph Fu.
Under a plan to be announced by the State Administration of Taxation at a conference in Dongguan today, foreign workers who file returns and settle unpaid personal income taxes for the past three years by the end of June will be exempted from penalty payments, normally set at 50 per cent to 500 per cent of the outstanding amount.
'This transitional policy is really to give people a message saying that we understand the problem is not all your fault, so we are giving you a way out,' Mr Fu said, adding it would reduce resistance to increased tax enforcement.
Ernst & Young had lobbied for such an offer for years.
Foreigners who work in China more than 183 days a year must pay personal income taxes and are major contributors to this revenue flow.
Personal income tax collection, at 121 billion yuan, was the fifth-largest source of tax revenue in China in 2002, after value-added tax, corporate income tax, business tax and import tariffs.
Although monthly tax filings are required, enforcement was lax until recent years, contributing to huge sums of unpaid income taxes.
The problem is more pronounced in southern China, where many foreign-funded factories have employed large numbers of people from Hong Kong for two decades.
Employers have been unnerved by the recent crackdown on tax evasion, as they shoulder the primary responsibility for ensuring employees file their monthly tax returns and withholding levies.
