China Issues Provisions Regarding Penalizing Tax-Collection Related Irregularities

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Jul. 23 – To strengthen the administration of tax collection and penalize tax-collection related irregularities, China’s Ministry of Supervision, Ministry of Human Resources and Social Security and State Administration of Tax jointly issued the “Provisions on Penalizing Tax-Collection Related Irregularities (hereinafter referred to as ‘Provisions’)” on June 6, which stipulates 15 categories, 37 kinds of irregularities, as well as the category and scope of corresponding penalties. Meanwhile, it enhances the cooperation between supervision authorities and tax authorities, and establishes the case-transfer system for tax-collection related irregularities. The Provision is scheduled to take effect on August 1, 2012.

According to the Provisions, if the tax authorities or tax officials have committed any of the following acts, the relevant culpable persons shall be given records of demerit or serious demerit; where the circumstances are relatively serious, they shall be given sanctions of demotion or removal from office; where the circumstances are serious, they shall be given sanctions of dismissal. The acts are:

  • Infringing upon the legitimate rights and interests of citizens, legal persons or other organizations while performing their duties
  • Abusing power, deliberately creating difficulties for taxpayers or withholding agents
  • Retaliating against taxpayers or withholding agents who complain of or report violations of the laws or rules of discipline on tax collection

The Provisions further state that persons who have conducted any of the following acts will also face such punishment if they:

  • In violation of laws and administrative regulations and without authorization, make decisions regarding the imposition or cessation of tax, tax reductions, tax exemptions, tax refunds or payments of tax underpaid, or other decisions contravening the laws or administrative regulations
  • Apportion tax in violation of laws and administrative regulations

It is also provided that tax authorities or tax officials will be subject to the aforementioned punishments if they:

  • Refuse to handle or deliberately delay handling tax violations that have been discovered within the jurisdiction, thus causing losses to State revenues
  • Engage in malpractice for personal gain or neglect of duty, fail to collect or under-collect the tax that should be collected, thus causing losses to State revenues

In addition, the Provisions emphasize that close relatives of tax authority leading cadres shall not be involved in the intermediate activities relating to tax-collection businesses that fall within the jurisdiction of such cadres. If this occurs, the cadres may face punishment ranging from sanction of demerit to sanction of dismissal.

It is required by the central government that supervision authorities, departments of human resources and social security, and tax authorities at all levels shall be fully aware and carefully study the importance of implementing the Provisions. Such entities are required to earnestly perform their duty and fully exert functional roles to ensure the full implementation of the Provisions.

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