New measures to boost revenue
In addition to reforming the individual income tax law (IIT), mainland authorities are expected to tighten tax collection to make it far more efficient and to prevent tax evasion.
Jacky Chu, tax partner with PricewaterhouseCoopers Hong Kong, says income tax revenue last year increased 26.8 per cent, thanks to salary increments and effective collection and enforcement measures.
Expectations are high that efficient tax collection in future will help ensure full compliance and reduce tax evasion, resulting in less revenue shortfalls.
'Personal tax payers in China should be prepared for greater enforcement of the current personal tax system.
'We understand that the State Administration of Taxation is placing a lot of emphasis on ensuring compliance with its tax laws, not just in the area of personal taxation, but all areas of taxation,' says Gary James, tax partner at DBO.
Jim Chung, tax partner with Deloitte China, says he expects local tax bureaus to strengthen tax collection and administration laws because the proposed individual tax reforms could reduce revenue from salaries.
'There is a possibility that the local tax bureaus may focus on tax investigations on high-net-worth individuals and [people] working in certain industries, [such as] finance, banking and real estate.
'[These] are considered as high-income-earning industries in the eyes of tax [officials],' he says.
'Taxpayers are advised to closely monitor the latest developments in taxation reforms, seek advice from their tax advisers and take appropriate action to rectify non-compliance matters, if any.'