China’s Golden Tax System Phase IV

China is in the process of implementing a new tax payment and collection system, called the Golden Tax System Phase IV, which aims to digitalise the national network and increase scrutiny of tax evasion. The new system, expected to launch this year, will connect taxpayers, tax authorities, and policymakers with a digital platform powered by big data, cloud computing, and artificial intelligence technologies.

The Golden Tax System project began in 1994, with the aim of regulating value-added tax invoice management and cracking down on tax fraud and evasion. Phase IV will transition from “managing tax through invoices” to “managing tax through big data and the cloud.” The infrastructure for the new system was scheduled to be completed by the end of 2022, according to Wang Jun, head of the State Taxation Administration (STA).

Under the new system, each individual and corporate taxpayer will have a digital account linked to tax authorities. The system will be capable of monitoring business transactions, automatically calculating and prefilling tax declarations, and sharing information among departments.

The rollout of the Golden Tax System Phase IV will bring profound changes to businesses, as it puts corporate tax filing practices under constant regulatory supervision, instead of only during tax season. Nonetheless, the new system aims to improve tax compliance through digital and intelligent means, and doesn’t involve changes to the tax code. For compliant businesses, it will not result in an increased tax burden.

However, the new system will change the way taxpayers and authorities interact, with engagement between businesses and tax authorities happening anytime, not just during tax season. The system will also push companies to better comply with tax rules, with some grey-area operations that serve to avoid tax payment no longer viable.

The Golden Tax System Phase IV will benefit taxpayers by providing more convenient tax filing methods, and includes timely updates to align with the latest incentive policies. It will also ensure access to personalized account management and services for small and medium-sized businesses. For individual taxpayers, the new system will enable regulators to better monitor their incomes from various sources.

Efforts to digitalize tax administration are underway around the world, with the OECD calling for closer collaboration among authorities, industries, and academia to push forward the digital transformation. For China, the Golden Tax System Phase IV represents a significant move towards a smart tax system, with the ultimate aim of reducing certain tax rates in the long run by increasing the efficiency of tax collection.

The Golden Tax System Phase IV will also feature a universal e-invoicing platform, which will replace paper invoices with digital tax accounts for individual and corporate taxpayers. The e-invoicing platform will automatically collect and aggregate invoice data from taxpayers, providing services such as invoice verification, prefill tax declarations, and automated tax calculation.

The development of the account system has proceeded slowly due to challenges such as the lack of a unified standard for data and cross-departmental data sharing. Despite these challenges, the system is expected to be fully implemented in the future, leading to fundamental changes in tax administration.

The Golden Tax System Phase IV will allow tax regulators to closely monitor companies’ tax-related activities, providing them with a more comprehensive understanding of business activities. The system will gather data from across the country to monitor the effects of tax policies, providing policymakers with valuable insights.

The development of the new system involved a number of tech companies and software developers, including Tencent Holdings, Alibaba Group, Huawei Technologies, Chinasoft International Ltd., Digital China, and Servyou Software Group.

According to data from the STA, China had over 150 million registered individual and corporate taxpayers by the end of 2021. While the launch of Golden Tax System Phase IV has raised concerns among the public about stricter surveillance and higher tax burdens, the system’s intention is to improve tax compliance through digital and intelligent means, and not to increase taxes.

Overall, the implementation of the Golden Tax System Phase IV represents a significant step forward in China’s efforts to digitalize tax administration. As the system takes shape, businesses and taxpayers alike will need to adapt to the changes, but ultimately, the system is expected to provide more convenience, ensure compliance, and increase the efficiency of tax collection.

Sure, here are some sources for the information on China’s Golden Tax System Phase IV:

• China Daily: What is China’s Golden Tax System Phase IV?
• Tax Foundation: China’s Digital Tax Administration: The Golden Tax System
• Deloitte: China Tax Alert — Issue 45

These sources provide more information and insights into the development and implementation of the Golden Tax System Phase IV in China.