Wider net cast to catch tax evaders

PUBLISHED : Wednesday, 12 January, 2005, 12:00am
UPDATED : Wednesday, 12 January, 2005, 12:00am

After recovering 70b yuan last year, an agency will intensify efforts using information technology for revenue collection

Beijing will step up its fight against tax evasion in the coming year, after a successful drive which helped to recover nearly 70 billion yuan last year, according to the country's taxation chief.

State Administration of Taxation director Xie Xuren said yesterday that his agency would use information technology to increase the efficiency of tax collection. It would also launch industry-specific tax audits.

The central government identified more than 30 billion yuan in under-reported tax liabilities last year, while another 40 billion yuan in delayed tax payments was also retrieved.

This accounted for 2 to 3 per cent of the total growth of 526 billion in tax revenue last year. The record high figure, represented an annual growth rate of 25.7 per cent.

Mr Xie attributed the growth to the scorching pace of economic growth and more efficient tax collection.

But he cautioned that the same rate of increase was unlikely to be repeated this year because of the cooling of the previously overheated economy and less room for penalties and collecting arrears because the most serious offences had already been dealt with.

Last year's increase in tax revenue was about equal to the annual total of taxation receipts a decade ago.

Mr Xie said the proposal to unify corporate tax rates and treat foreign and domestic business entities alike, which some multinationals had criticised, was a policy decision made at the third plenum of the 16th Party Congress in 2003. Some further reform proposals formulated last year would be the basis of further study this year.

But he did not give a timetable for implementing the plan. Previous government documents have vaguely given a timeframe of five to 10 years.

Mr Xie said the expansion of tax revenue far outpaced the 9.3 per cent growth of the mainland's gross domestic product last year because of accounting and structural differences in collecting the two sets of the data.

Imports, for example, were subtracted from GDP because the goods or services were produced abroad, but the duties on imports contributed a significant amount to mainland tax revenue. Mainland imports rose 30 per cent last year to 370 billion yuan.

The bumper tax harvest has given rise to calls for reform of the tax system with more emphasis on equitability and future growth.

A Chinese Academy of Social Sciences study highlighted the need to use tax policy to foster the growth of the middle class.

Unlike synchronised growth in investment and consumption in previous economic cycles, the academy said the current cycle was characterised by strong investment, but anaemic consumer spending and taxation policy could be employed as a lever to guide growth.