Explainer | Chinese taxman’s secret weapon to crack down on evasion: phase IV of the Golden Tax System
- With tax evasion costing China tens of billions of yuan a year, authorities are looking to plug leaks and shore up oversight
As China presses on to harness the power of the data to close loopholes in tax collection amid a new round of fiscal and tax reforms to improve tax revenue, the latest phase of the Golden Tax System will be key to enhancing tax law enforcement and efficiency.
What is China’s Golden Tax System?
China’s Golden Tax System is a broad tax IT administration and monitoring system, first rolled out in 1994, and now in its third phase of operation.
A key function is the control of the creation of invoices, known as fapiaos – a legal receipt that serves as proof of purchase for goods and services.
Phase IV of the Golden Tax System aims to build an information-sharing system among financial institutions, taxpayers and tax authorities. The integrated system will help tax authorities collect and analyse tax-related data from more fields to improve tax supervision.
In particular, phase IV will see a full digitalisation of invoices. China’s invoicing process is a crucial component of the country’s tax system.
By the end of 2023, all provinces in the country had launched digitalised fapiao pilot programmes. The exact date of the launch of the national e-invoicing for submission and exchange of digitalised fapiao has yet to be confirmed.
So, while the nationwide deployment of phase IV is not yet fully complete, some functions are already operational.
