China Issues Guiding Opinions to Regulate Taxation Administrative Discretion

To standardize the enforcement of taxation law and safeguard the legitimate rights and interests of taxpayers, China’s State Administration of Taxation (SAT) issued the “Guiding Opinions on Regulating the Administrative Discretion of Taxation Authorities (guoshuifa[2012] No.65, hereinafter referred to as ‘Opinion’)” on July 3. The Opinion puts forward five guiding opinions based on the current situation of tax collection.

Key information and details taken from the Opinion can be found in the summary below.

Understanding the necessity of standardizing taxation administrative discretion

• Standardizing taxation administrative discretion is necessary to serve scientific development and to co-construct harmonious taxation.
• Standardizing taxation administrative discretion is required to promote administration by law and to guarantee the legitimate rights of taxpayers.
• Standardizing taxation administrative discretion is an effective way to strengthen the self-construction of tax authorities and to prevent law enforcement risks for tax collection.

Standardizing the basic requirements for taxation administrative discretion

Legitimate discretion

•  Tax authorities shall exercise administrative discretion in compliance with laws and regulations.

Reasonable discretion

• Tax authorities shall exercise administrative discretion in compliance with legislative objects and legal principles.

Justifiable discretion

• Tax authorities shall treat taxpayers equally when exercising administrative discretion and offer the same treatment to all taxpayers under similar situations.
• Where the taxation decisions are already in effect, they shall not be revoked or altered without statutory basis and without going through statutory procedures.
• In the case where it is necessary to revoke or alter any administrative decision based on State interests, public interests or any other legally allowable reasons, statutory authorization and established procedures regarding such revocation or alteration must be followed, and any property loss incurred by taxpayers should be compensated properly according to the law.

Due process

• Tax authorities shall exercise administrative discretion in strict accordance with due process, and seek opinions from taxpayers in order to guarantee the peoples’ rights to information, participation and relief.

Openness and transparency

• The basis and procedures for law enforcement and the handling of results shall be open to the public except in the cases involving state secrets, business secrets or personal privacy have been involved.

Establishing a benchmark for taxation discretion

• The discretion benchmark acts as a summary and abstract of previous law-enforcement actions and experiences.
• State tax authorities and local tax authorities in all provinces, autonomous regions, and municipalities directly under the Central Government shall, based on the actual tax collection situation of their own regions, co-formulate a unified discretion benchmark that applies to such regions to regulate taxation administrative discretion.
• Tax authorities shall enforce laws according to the discretion benchmark.
• Tax authorities, when exercising the discretion benchmark, shall seek opinions from law enforcement officers, taxpayers and experts to make a timely evaluation. Moreover, they should improve and perfect the discretion benchmark based on the results of such evaluations.

Steps to perfecting the taxation administrative discretion system

• Perfecting the notification system
• Perfecting the withdrawal system
• Perfecting the statement and defense system and hearing system
• Perfecting the explanation system
• Perfecting the panel discussion system of major matters regarding law enforcement
• Perfecting the record-filing system for major matters regarding law enforcement

Steps to reinforce leadership, strictly implement laws and regulations, and provide a powerful guarantee for standardizing taxation administrative discretion

• Strengthening leadership, making careful arrangements
• Defining responsibilities, enhancing coordination
• Conducting overall planning, promoting major projects
• Emphasizing guidance, strengthening supervision
• Improving capacity, guaranteeing efficiency

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