Centre for Tax Policy and Administration

Country Programme on Taxation with the People's Republic of China

 

The OECD tax programme with China was launched in 1996. Both the Ministry of Finance and the State Administration of Taxation (SAT) are partners in the programme. A fixed base for seminars and workshops for SAT officials was established when the Beijing International Tax Centre was opened in September 1997.

China initiated a major tax reform in 1994 with the objective to build up a tax system adaptable to its developing socialist market economy. Today China's tax system faces two major challenges: securing the revenue base and adapting to international norms. The reform of personal and corporate income tax has not yet been completed. In the area of VAT the tax administration is faced with widespread cases of evasion and illegal refunds. In the international context, China has introduced an open-door policy as part of its economic reform. More foreign direct investment is to be attracted, especially in the key areas of energy, infrastructure, services (banking, finance, insurance, and retailing), key manufacturing industries and agriculture. Issues of international taxation are therefore rapidly growing more important; the application of tax treaties is an increasingly significant issue and combating cross-border tax evasion and avoidance is becoming a pressing concern.

The OECD's assistance to China has been intensified with the establishment of the Beijing International Tax Centre. This enables a large number of SAT officials to attend OECD workshops provided in co-operation with OECD Member countries.

The Centre aims to:

  • provide a coherent framework for bilateral and multilateral assistance to Chinese tax officials,
  • provide professional, high quality policy dialogue with senior officials from the head office and the regional offices of SAT to support tax reform and facilitate the application of new tax laws, and
  • train instructors who can disseminate information on international rules on taxation throughout the country.

10 weeks of seminars and workshops are organised at the centre every year. The courses offered cover both tax policy and tax administration issues. Course topics include: Application of Tax Treaties, Transfer Pricing, Enterprise Income Tax, and Taxation of Financial Institutions. They are given by instructors from OECD Member countries and international organisations including the Asian Development Bank (ADB) and the World Bank. A Chinese tax expert, seconded from the SAT to the OECD Headquarters, assists the Secretariat in the preparation of the courses and the adaptation of the course programme and materials to China's special situation. Participants come from the head office of SAT and the regional SAT offices. An end-of-course evaluation is carried out after each seminar, and participants have generally expressed a high level of satisfaction with the programme.

Other OECD tax co-operation with China takes the form of joint OECD-China workshops and China's participation in a wide range of activities in the framework of OECD policy dialogue. Every year, one or two OECD-China joint tax seminars are organised with the Ministry of Finance and the SAT to discuss specific issues of tax reform in China. Topics for joint seminars include: Taxation of Financial Institutions and Financial Instruments, Transfer Pricing and International Tax Audit, and Intergovernmental Fiscal Relations.

The co-operation with China has benefits both for China and the OECD Member countries. The OECD is seen as a neutral advisor delivering high-quality advice. Major achievements of the programme so far are:

  • development of an ongoing tax policy dialogue between China and other important economies;
  • creation of a tax environment in China more favourable towards inbound investment;
  • reduction of international tax conflicts through the improved application of tax treaties and development of transfer pricing rules;
  • identification of weaknesses in the Chinese tax laws and discussion of possible improvements;
  • independent expert comments on draft tax laws.


 

 

 

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