The State Administration of Taxation, in conjunction with the Ministry of Finance, has formulated the "Revised Draft of the Tax Collection and Administration Law of the People's Republic of China" (hereinafter referred to as the "Draft for Comments") for public consultation starting from March 28th. As a daily necessity for tax lawyers, I couldn't help but take a look at the Tax Administration Law. It can be said that every revision, addition, or deletion of its provisions directly affects the tax cases in my hands. Taking this opportunity, the author selects several clauses that tax lawyers are most concerned about when handling cases, and together with readers, reads the "Draft for Soliciting Opinions" and proposes appropriate revision suggestions. [Note: The bolded parts of the entire text are newly added to the draft for soliciting opinions]

1、 Strengthen the unity and standardization of tax law enforcement among regions

Clause: Article 5, Paragraph 1 of the Draft for Soliciting Opinions: The competent tax department of the State Council, in charge of national tax collection and management, shall strengthen the unity and standardization of tax law enforcement among regions in accordance with the law. Local tax authorities shall conduct tax collection and management in accordance with the scope of tax collection and management prescribed by the State Council

My viewpoint:

Emphasize the "unity" of tax enforcement between regions. In the current tax case handling process, tax authorities in different regions may adopt vastly different approaches for the same behavior. For example, downstream enterprises' acceptance of false opening behavior has led to diverse handling methods by tax authorities in different regions: some recognize good faith acquisition, some require input transfer and payment of value-added tax and late fees, some classify it as "tax evasion", and some transfer it to public security. This article emphasizes strengthening the unity of law enforcement in accordance with the law, which will require tax authorities in different regions to provide consistent processing results for similar tax cases. This new statement is of great benefit to the improvement of the standardization of law enforcement by tax authorities and the protection of taxpayers' rights and interests.

2、 Implement information sharing mechanism

Clause: According to the needs of tax collection and management work, the competent tax department of the State Council may, through relevant departments such as the State Council's public security, financial management, customs, etc., inquire about the identity, accounts, fund transactions, imports and exports, and other tax related information of taxpayers. The relevant departments shall cooperate and assist.

My viewpoint:

In recent years, multiple departments have issued multiple documents emphasizing information collaboration. This revision of the Tax Collection and Management Law has elevated this provision to the legal level for implementation, which is extremely helpful in strengthening the tax collection and management capabilities of tax authorities.

3、 Clarify the criteria for tax authorities to make decisions

Clause: Article 13, Paragraph 2 of the Draft for Soliciting Opinions: When tax authorities investigate and deal with tax violations, they shall determine the facts clearly, provide sufficient evidence, apply correct basis, follow legal procedures, and handle them fairly and justly in accordance with the law.

My viewpoint:

This article specifies the criteria for determining and investigating tax violations by tax authorities. This is consistent with the standards that specific administrative actions of administrative organs should meet, as confirmed in Article 68 of the Administrative Reconsideration Law and Article 69 of the Administrative Litigation Law, and enhances the coordination and connection between the Tax Administration Law and relevant laws.

4、 Strengthen the responsibility of platform operators

Clause: Article 29 of the Draft for Soliciting Opinions stipulates that e-commerce platform operators, as stipulated in the E-commerce Law of the People's Republic of China, shall submit the identity information and tax related information of the operators on the platform to the tax authorities in accordance with the time limit and directory list prescribed by the competent tax department of the State Council. Other operators of online trading platforms shall submit the identity information and tax related information of operators and employees on the platform to the tax authorities in accordance with the provisions of the preceding paragraph. E-commerce platform operators and other online trading platform operators shall handle tax related matters such as tax declaration for operators and employees within the platform in accordance with the regulations of the competent tax department of the State Council

My viewpoint:

On December 20, 2024, the State Administration of Taxation published the Regulations on the Submission of Tax related Information of Internet Platform Enterprises (Draft for Comments) for public comments, which stipulates that platform operators shall handle the tax declaration of operators and employees in the platform. However, the author believes that considering the large number of operators and practitioners on the platform, the platform operators have limited ability to review the information submitted by the above-mentioned entities. If there is a situation of underpayment of taxes due to incorrect information, the issue of attribution is highly likely to lead to disputes. Therefore, the revision of this article should be connected with the future Provisions on Reporting Tax related Information of Internet Platform Enterprises, and should clarify the division of rights, obligations and responsibilities among tax authorities, platform operators, platform operators and other entities.

5、 Include account balances of non bank payment institutions in the scope of compulsory enforcement

Article 43 of the Draft for Soliciting Opinions: Tax authorities may implement the following compulsory measures: (2) Notify non bank payment institutions in writing to freeze the taxpayer's payment account balance equivalent to the amount of tax payable If the tax payment is still not made at the end of the deadline, with the approval of the director of the tax bureau (sub bureau) at or above the county level, the tax authority may notify banks, other financial institutions, and non bank payment institutions in writing to transfer the tax payment from their frozen deposits, remittances, non bank payment institution payment account balances, or other assets, or auction or sell the seized or sealed goods, goods, or other property in accordance with the law, and use the proceeds from the auction or sale to offset the tax payment, and the remaining part shall be refunded to the taxpayer.

My viewpoint:

The newly added mandatory measures in this article increase the ability of tax authorities to recover overdue taxes, which helps to ensure the timely receipt of national tax payments. In practical operation, there is a type of dispute: a tax owing enterprise is in the process of court enforcement due to other debt disputes. After the court executes the property, it should have paid the creditor, but the tax authority demands that the executed funds be used to pay the tax first on the grounds of priority. In my opinion, tax authorities do not have priority in such cases. At the same time, this amendment does not explicitly state that tax authorities have priority in this situation, and it is hoped that this provision can effectively curb such disputes.

6、 Expand the scope of personnel restricted from leaving the country due to tax arrears

Article 51 of the Draft for Soliciting Opinions stipulates that "Taxpayers or their legal representatives, main responsible persons, or actual controllers who owe taxes and need to leave the country shall settle the payable taxes, late payment fees, or provide guarantees to the tax authorities before leaving the country. If the unpaid taxes, late payment fees, or guarantees are not provided, the tax authorities may notify the immigration management agency to prevent them from leaving the country

My viewpoint:

According to the current Tax Administration Law and the Measures for Preventing Taxpayers from Leaving the Country, the scope of restrictions on taxpayers leaving the country is limited to the legal representative of the enterprise. This revised draft has added the main responsible person and actual controller. Although expanding the scope of personnel is more helpful in urging taxpayers to pay their taxes in full, there is no legal regulation that clearly defines how the main responsible person and actual controller of a company are defined. Therefore, in practice, the identification of the two can easily lead to disputes. If the specific criteria for measuring the identities of both parties are not further clarified, the measures to restrict their exit may affect the effectiveness of tax collection and may also trigger other disputes.

7、 Clearly state that in special circumstances, tax payments can be recovered from investors

Clause: Article 56 of the Draft for Soliciting Opinions: If a taxpayer's investor abuses the independent status of a legal person and the limited liability of the investor, adopts means such as withdrawing funds or canceling, resulting in the tax authority being unable to recover the unpaid, underpaid or overpaid taxes from the taxpayer, and the circumstances are serious, the tax authority shall recover the taxes and late payment fees from the investor.

My viewpoint:

This new provision is similar to the system of disregard of corporate personality in Article 23 of the new Company Law. As the taxpayer is not limited to companies (such as partnerships), the concept of "investor" is used in this article. Due to the lag in the discovery and investigation of tax cases, if this provision is ultimately presented in the new law, there may be a large number of situations in the future where tax authorities require investors to pay taxes on behalf of enterprises. To prevent excessive tax enforcement from exposing the legal personality or limited liability of investors, it is recommended to further limit the application of this provision.

8、 In certain circumstances, overpaid taxes will not be refunded

Clause: Article 59, Paragraph 2 of the Draft for Soliciting Opinions stipulates that "If the tax authorities at or above the provincial level, based on the request of relevant national departments or evidence, believe that taxpayers have overpaid taxes for the purpose of obtaining financing, company listing, increasing performance, or obtaining qualifications, the tax authorities shall not refund them

My viewpoint:

In practice, there is a type of case where taxpayers issue invoices to external parties due to financing, listing, increasing performance, or obtaining certain qualifications (without downstream deduction and cost allocation), resulting in the invoicing party paying more value-added tax and corporate income tax. As this behavior violates the provisions of the Invoice Management Measures and is considered illegal, it is not protected by law. This provision clarifies the issue and helps to reduce the occurrence of such illegal activities.

9、 If the accumulated amount of unpaid or underpaid taxes is significant, the collection period can be extended to 5 years

Clause: Article 59, Paragraph 2 of the Draft for Soliciting Opinions stipulates that "If a taxpayer or withholding agent fails to pay or underpays taxes due to calculation errors or other errors, the tax authority may recover the taxes or late payment fees within 3 years; if the cumulative amount of unpaid or underpaid taxes is large, the recovery period may be extended to 5 years

My viewpoint:

Article 82 of the current Implementation Rules of the Tax Administration Law stipulates that if the cumulative amount of unpaid or underpaid taxes exceeds 100000 yuan, the collection period shall be extended to 5 years. The statement 'relatively large cumulative amount' in this article provides some room for refinement in future revisions of the implementation rules.

10、 During tax inspections, taxpayers' non bank payment accounts can be queried

Article 62 of the draft for soliciting opinions stipulates that tax authorities have the right to conduct the following tax inspections: (9) With the approval of the director of a tax bureau (sub bureau) at or above the county level, and with a nationally standardized inspection certificate, they can query the payment accounts of taxpayers and withholding agents engaged in production and operation at non bank payment institutions. When investigating tax illegal cases, tax authorities may, with the approval of the director of the tax bureau (sub bureau) at or above the level of a city divided into districts or autonomous prefecture, inquire about the payment accounts of non bank payment institutions of the suspected persons in the case. The information obtained by tax authorities through inquiry shall not be used for purposes other than collection and management.

My viewpoint:

With the development of the economy, existing payment accounts are no longer limited to accounts of banks and other financial institutions. This article expands the scope of tax inspection by tax authorities to payment accounts of non bank payment institutions, further enhancing the tax authorities' collection and management capabilities.

11、 Taxpayers are required to bear the burden of proof

Article 66 (3) of the Draft for Soliciting Opinions: If the parties explicitly acknowledge the evidence collected by the tax authority, the evidential effect of the evidence may be recognized; If the parties deny, sufficient evidence should be provided.

My viewpoint:

This provision violates the principle of inversion of the burden of proof in administrative law and deviates from the principle of burden of proof confirmed by administrative organs in Article 46 of the Administrative Reconsideration Law and Article 35 of the Administrative Litigation Law. According to the above regulations, whether it is a reconsideration procedure or a litigation procedure, the burden of proof lies with the administrative authority. The author believes that this article should further clarify that in the tax inspection (check) stage, if the parties deny the evidence collected by the tax authorities, they should provide sufficient evidence. But in the process of tax administrative reconsideration and litigation, the burden of proof should still belong to the tax authorities.

12、 The inspection process for newly added major tax cases must also restrict the exit of relevant personnel

Article 68 of the draft for soliciting opinions stipulates that when tax authorities investigate and deal with suspected cases of major tax violations, with the approval of the tax authorities of provinces, autonomous regions, and municipalities directly under the central government, they may notify immigration management agencies to prevent taxpayers, their legal representatives, main responsible persons, actual controllers, and other important personnel involved in the case from leaving the country.

My viewpoint:

According to Article 47 of the "Regulations on the Procedures for Handling Tax Inspection Cases", the inspection bureau should make a conclusion within 90 days. However, at the same time, this regulation also provides a guarantee that "complex cases can be postponed", which has resulted in many tax cases being delayed for a long time. In addition, after the tax authorities make a conclusion, taxpayers also have the right to review and sue, and the specific administrative actions involved may be overturned in the future. Therefore, it is unreasonable to restrict the exit of relevant personnel during the investigation and handling of the case. I suggest deleting this article.

13、 Replacing 'tax evasion' with 'tax evasion' is consistent with the means stipulated in criminal law and judicial interpretations

Clause: Article 73 of the draft for soliciting opinions states that taxpayers who use the following means to make false tax declarations or fail to declare, fail to pay or underpay taxes shall be considered as tax evasion. Taxpayers who evade taxes shall be pursued by the tax authorities for the unpaid or underpaid taxes, late payment fines, and a fine of not less than 50% but not more than 5 times the amount of unpaid or underpaid taxes; If a crime is committed, criminal responsibility shall be pursued in accordance with the law:

（1） Falsifying, altering, transferring, concealing, or destroying accounting books, vouchers, or other tax related materials without authorization; Tampering, forging, or illegally deleting electronic vouchers, electronic invoices, and other tax related electronic data or tax related accounting software parameter rules;

（2） Fabricating false tax basis, falsely listing expenses, transferring or concealing income or property, or borrowing or impersonating others to decompose income;

（3） Violating tax incentives by providing false materials and other means;

（4） Taxpayers who have already registered their establishment and have engaged in taxable activities with a large amount of tax payable but do not declare it;

（5） Taxpayers who have not registered their establishment in accordance with the law engage in taxable activities, or taxpayers who do not need to register their establishment in accordance with the law engage in taxable activities and have a large taxable amount, but fail to declare after being notified by the tax authorities;

（6） Other tax evasion behaviors stipulated by laws and administrative regulations.

If the withholding agent adopts the means listed in the preceding paragraph and fails to pay or underpays the deducted or collected taxes, the tax authority shall recover the unpaid or underpaid taxes, late payment fines, and impose a fine of not less than 50% but not more than 5 times the amount of unpaid or underpaid taxes; Those who commit crimes shall be held criminally responsible in accordance with the law.

Taxpayers who, after paying taxes, use the means listed in this article to defraud tax refunds other than export tax refunds shall be dealt with and punished in accordance with the provisions of the first paragraph of this article.

My viewpoint:

This provision clearly states that "engaging in taxable activities with a large amount of tax payable but not declaring" constitutes tax evasion, and the revised Implementation Rules of the Tax Collection and Administration Law in the future should make provisions for "large amounts". At the same time, this article merges Article 63 and the second paragraph of Article 64 of the current Tax Collection and Management Law, and is linked with Article 1 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving Harm to Tax Collection and Management (Interpretation [2024] No. 4) implemented on March 20, 2024, officially elevating the classification of "non declaration" to "tax evasion". In addition, the fifth situation in tax evasion methods is not clearly stated, which can easily lead to ambiguity and requires further consideration in its wording.

14、 Clarify the legal consequences of "other non declaration" situations

Article 74: If a taxpayer or withholding agent fails to declare in accordance with the provisions of Article 73 of this Law, resulting in unpaid or underpaid taxes, the tax authorities shall recover the unpaid or underpaid taxes and late payment fees; For serious cases, a fine of up to 50% of the unpaid or underpaid taxes may be imposed; If the circumstances are serious, a fine of not less than 50% but not more than one time the amount of unpaid or underpaid taxes shall be imposed.

My viewpoint:

Article 73 of the "Draft for Soliciting Opinions" stipulates that "taxpayers who have already registered their establishment and have a large taxable amount but fail to declare constitute tax evasion" and "taxpayers who have not registered their establishment and have a huge taxable amount but refuse to declare after notification constitute tax evasion". However, there are exceptions in practice, so this article establishes a fallback requirement that although not treated as tax evasion, small multiples of fines can be imposed.

15、 For those who have committed illegal acts but have not caused non payment or underpayment of taxes, a small penalty should be imposed

Article 75: If a taxpayer or withholding agent fabricates false tax calculation basis but does not result in non payment or underpayment of taxes, the tax authority shall order them to make corrections within a time limit and impose a fine of up to 50000 yuan.

My viewpoint:

This article has added a new prerequisite, namely "not causing non payment or underpayment", which makes the distinction and application of Article 73 and Article 75 clearer.

16、 Add a new handling method for "administrative fraud"

Clause: Article 83 of the Draft for Soliciting Opinions states that issuing invoices that do not match the actual business situation for others, oneself, having others issue invoices for oneself, or introducing others constitutes the act of issuing false invoices. The tax authorities shall confiscate the illegal income and may impose a fine of up to 500000 yuan; For those who falsely issue invoices with a huge amount, a fine of not less than 500000 yuan but not more than 5 million yuan shall be imposed; Those who commit crimes shall be held criminally responsible in accordance with the law.

For those who illegally provide assistance to taxpayers by issuing false invoices, the tax authorities may impose a fine of up to 50000 yuan in addition to confiscating their illegal gains.

My viewpoint:

This article provides a clear definition of "administrative fraud" for the first time. However, the wording of this article needs to be further clarified. It should be clarified that "although taxpayers engage in fraudulent behavior, it only constitutes administrative fraud. Without the need to transfer to judicial authorities for criminal responsibility, tax authorities may confiscate illegal gains and impose fines." This provision reflects the principle of "non bis in idem".

17、 Those who assist others in committing tax violations shall be punished

Clause: Article 84 of the Draft for Soliciting Opinions stipulates that if a taxpayer or withholding agent illegally provides bank accounts, invoices, certificates, or other conveniences, or instigates, induces, or assists a taxpayer or withholding agent in committing tax violations, resulting in unpaid or underpaid taxes or fraudulently obtaining national export tax refunds, the tax authorities may impose a fine of up to one time the unpaid, underpaid, or fraudulently obtained taxes, in addition to confiscating their illegal gains.

My viewpoint:

This provision stipulates for the first time that assisting others in tax evasion shall be subject to administrative liability. However, the phrase 'and other conveniences' in this provision may lead to an expanded interpretation in practice, which may cause disputes and harm the rights and interests of administrative counterparties. Therefore, it is suggested to provide a clear and positive listing of "and other conveniences" in this clause.

18、 Change the pre tax procedure from before reconsideration to before litigation

Clause: Article 101, Paragraph 1 of the Draft for Soliciting Opinions stipulates that taxpayers, withholding agents, and tax guarantors may apply for administrative reconsideration in accordance with the law when disputes arise between them and the tax authorities over tax payments; Those who are dissatisfied with the administrative reconsideration decision must first pay or release the tax and tax late payment fees or provide corresponding guarantees in accordance with the decision of the tax authority, and then file a lawsuit with the people's court in accordance with the law. The people's court shall accept the case based on the tax payment certificate or guarantee certificate issued by the tax authority.

My viewpoint:

In practice, according to Article 88 of the current Tax Administration Law and Article 33 of the Tax Administrative Reconsideration Rules, taxpayers who are unable to pay taxes in advance or provide tax guarantees may lose their relief channels. This provision places "pre tax payment" after reconsideration and before litigation, which can broaden the relief channels for taxpayers. But the author believes that in order to better protect the legitimate rights and interests of taxpayers and open up their relief channels, the "pre tax payment" procedure should be officially abolished.

19、 Strengthen the supervision of tax service agencies

Clause: Article 102 (2) of the Draft for Soliciting Opinions: The state encourages tax related professional service institutions to carry out tax agency business in accordance with the law, and tax authorities shall strengthen the supervision of tax related professional service institutions and individuals engaged in tax related professional services.

My viewpoint:

The content of strengthening the supervision of individuals engaged in tax related professional services by tax authorities is too broad and lacks operability. The author believes that according to current legal provisions, tax authorities should only supervise tax related professional service agencies within the scope limited by relevant laws.

brief summary

This revision is of great benefit to strengthening the level of tax law enforcement and improving taxpayers' compliance. In addition to the provisions that the author is more concerned about, there are several revisions made to the draft for soliciting opinions, including adding 16 articles, deleting 4 articles, and modifying 69 articles compared to the current Tax Administration Law. Readers are welcome to follow and discuss the draft for soliciting opinions in this round. We suggest that readers submit useful revision suggestions to relevant authorities before April 27th to jointly promote the process of tax legal construction in China.