24 Years Later - China Finally Centralizes Its Tax Administration

Research output: Contribution to journalArticle

Abstract

As part of a substantial overhaul of its tax system, in 1994 China established two tax administration systems, one under the control of the central government and separate agencies in each province supervised by provincial governments. Responsibility for collecting individual and company income taxes, VAT on the sale of goods and Business Tax on the provision of services was divided between the two levels of tax administration. The Business Tax was assigned exclusively to the provincial tax offices and all revenue from the tax was retained by provincial governments. Commencing in 2012, the central government began shifting the Business Tax base into the VAT, which became a conventional VAT that applied to both goods and services. The transfer was completed in 2016. Along with the centralization of all tax revenue, the government announced in March 2018 that it would incorporate the provincial tax administrations into the central State Administration of Taxation. A temporary arrangement has seen the central government distribute to provincial governments, which lost their Business Tax base, a higher share (formerly 25 per cent and now 50 per cent) of VAT revenue it collects. However, it remains to be seen to what extent centralization of tax administration may be related to longer term realignment of tax distribution in China.
Original languageEnglish
Pages (from-to)539-544
Number of pages6
JournalTax Notes International
Volume90
Issue number5
Publication statusPublished - 2018

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taxes
China
centralization
revenue
tax system
tax revenue
income tax
sale
taxation
responsibility

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title = "24 Years Later - China Finally Centralizes Its Tax Administration",
abstract = "As part of a substantial overhaul of its tax system, in 1994 China established two tax administration systems, one under the control of the central government and separate agencies in each province supervised by provincial governments. Responsibility for collecting individual and company income taxes, VAT on the sale of goods and Business Tax on the provision of services was divided between the two levels of tax administration. The Business Tax was assigned exclusively to the provincial tax offices and all revenue from the tax was retained by provincial governments. Commencing in 2012, the central government began shifting the Business Tax base into the VAT, which became a conventional VAT that applied to both goods and services. The transfer was completed in 2016. Along with the centralization of all tax revenue, the government announced in March 2018 that it would incorporate the provincial tax administrations into the central State Administration of Taxation. A temporary arrangement has seen the central government distribute to provincial governments, which lost their Business Tax base, a higher share (formerly 25 per cent and now 50 per cent) of VAT revenue it collects. However, it remains to be seen to what extent centralization of tax administration may be related to longer term realignment of tax distribution in China.",
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24 Years Later - China Finally Centralizes Its Tax Administration. / Li, Na; Krever, Richard Edward.

In: Tax Notes International, Vol. 90, No. 5, 2018, p. 539-544.

Research output: Contribution to journalArticle

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AB - As part of a substantial overhaul of its tax system, in 1994 China established two tax administration systems, one under the control of the central government and separate agencies in each province supervised by provincial governments. Responsibility for collecting individual and company income taxes, VAT on the sale of goods and Business Tax on the provision of services was divided between the two levels of tax administration. The Business Tax was assigned exclusively to the provincial tax offices and all revenue from the tax was retained by provincial governments. Commencing in 2012, the central government began shifting the Business Tax base into the VAT, which became a conventional VAT that applied to both goods and services. The transfer was completed in 2016. Along with the centralization of all tax revenue, the government announced in March 2018 that it would incorporate the provincial tax administrations into the central State Administration of Taxation. A temporary arrangement has seen the central government distribute to provincial governments, which lost their Business Tax base, a higher share (formerly 25 per cent and now 50 per cent) of VAT revenue it collects. However, it remains to be seen to what extent centralization of tax administration may be related to longer term realignment of tax distribution in China.

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