Taxation in the People's Republic of China

Taxation in the People's Republic of China

Taxation in the People's Republic of China

Taxation in the People's Republic of China


This book is the first to provide a comprehensive treatment of China's domestic system of taxation. Set within the broader context of the nation's economic and fiscal structure, it offers an authoritative analysis of each type of taxation and the tax system as a whole. The author, who is one of the foremost authorities on Chinese tax policy, has drawn extensively on Chinese publications as well as personal contacts with Chinese government officials and western lawyers and businessmen working in China.


"Does China really have a tax system?" That is a question I have been asked on numerous occasions, by colleagues and friends, over the four years during which I was conducting the research for this book.

The response, today, is emphatically "Yes!" But a decade ago the question might not have been so simple to answer, for the Chinese tax system is at one and the same time probably the most ancient and also the most recent in the world. Records of land taxes in China go back almost four thousand years, and the present Agriculture Tax does not differ fundamentally from that introduced by the famous tax reformer, Yang Yan, in 780 A.D. Yet when the People's Republic of China was declared in 1949, the tax system had almost completely broken down, a result of several decades of continual warfare. One of the first acts of the new government was to abolish the laws of the former Nationalist regime so, at the end of 1949, it could be said that China was virtually without a tax system.

The following thirty years saw massive changes in the economic, political, and social life of China--changes that were reflected in the country's tax system. New taxes were introduced almost immediately, in 1950, and these taxes grew, and then contracted, in step with the other changes to affect the country. By the time of the death of Mao Zedong, in 1976, the state had come to control, directly or indirectly, almost every aspect of the country's economic life. The countryside was orgarnized into people's communes, and in the towns practically all manufacturing and commerce were conducted by enterprises owned or controlled by the state. State enterprises accounted to the state for their profits. The only tax of any real importance was a form of turnover tax. Since almost all of the businesses that paid this tax also handed over their profits to the state, it was seriously questioned whether a tax system was needed at all.

The situation altered dramatically with the introduction of economic reforms, commencing at the end of 1978. Foreign-owned enterprises were encouraged to establish joint ventures in China, and foreigners came to manage them and to do business. State enterprises were given greater control over their funds, smaller enterprises were "re-collectivized" or leased to collectives or to individuals, and individuals were encouraged to establish their own businesses. All of these developments necessitated fundamental changes in the tax system, with the result that . . .

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