The State Taxation Administration in China is set to adopt the fourth phase of the Golden Tax Project in December, which will use big data to detect discrepancies and identify corporate tax evasion. However, the new system has raised worries, especially among Taiwanese companies, that it will provide a tool for greater surveillance of business operations and an excuse for investigation.

Xu Xiaoting, a senior accountant at the Taiwanese branch of consulting firm Deloitte, said the third phase of the project has already integrated data from national and local tax to facilitate comprehensive monitoring over the entire process of tax collection.

The fourth phase is expected to include data from business operations that are not directly related to taxation, including information held by all government departments, committees, the country’s central bank People’s Bank of China, as well as other banks and participating institutions. The new system will allow the tax authorities to easily examine the registration information of companies, their contact number and verify the authenticity of their tax information, hence a powerful tool for tax inspection.

Along with the new rules introduced in 2019 to step up regulation of corporate information, the Chinese government can identify discrepancies, including the illegal use of shell companies and fake accounts for scams, money laundering and tax evasion, as well as false invoices. The system will also flag mismatch between a company’s income and operating expenses, long-term losses, misreporting of employees’ salary and failure to declare smaller taxes such as property tax and stamp duty.

Once flagged by the system, the corporate will be scrutinized by the tax administration and the owners may be investigated.

While the Chinese government seems to have relaxed control on administrative procedures, Xu noted that it has not reduced checks and corporations are still required to actively abide by the rules. She suggested Taiwanese companies to review business operations and tax status to avoid running afoul of the law.

Click here for Chinese version

---------------------------------

Apple Daily’s all-new English Edition is now available on the mobile app: bit.ly/2yMMfQE

To download the latest version,

iOS: bit.ly/AD_iOS

Android: bit.ly/AD_android

Or search Appledaily in App Store or Google Play