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Chineseaircraft-carrier formation concludes open-sea combat training (Xinhua)
2021-12-31
Coronavirus: Xi'an residents running out of food as Chinese city enters eighth day of lockdown (SCMP)
2021-12-30
China Passes Long-Awaited Law on Protecting Wetlands (Caixin)
2021-12-29
China has passed its first law that is specifically designed to protect the country's vast wetlands, prohibiting illegal occupation and activities that harm the ecosystem in a bid to conserve and restore the "kidneys of Earth," as the country increases efforts to prioritize environmental protection. The Wetlands Protection Law, which fills the prolonged absence of a specific national law on the valuable but fragile ecosystem, stipulates that the country's wetland areas would be managed and classified as "general" or "important" based on factors including its ecological function and biodiversity. The legislation bans illegal occupation of wetlands deemed as nationally important. It also stipulates legal liability for violations which could lead to a maximum fine of 1 million yuan ($157,000). Wetlands are highly valuable for water quality, flood control and biodiversity as they provide habitats for plants and animals including migratory birds. China has more than 53.3 million hectares of wetlands, ranking first in Asia and fourth in the world, according to a government report. The new law has been approved by the Standing Committee of the National People's Congress, the national legislature's top decision-making body, and will be effective from June 1 next year. A draft version of the legislation was submitted for readings in January and October. Zhang Mingxiang, a professor of wetland ecology at Beijing Forestry University (BFU) who participated in the drafting of the law, told Caixin that the law clarifies the definition of wetlands and makes a "major breakthrough" regarding management of the ecosystem, determining the responsibilities of government agencies and provisions for coordination. The legislation also includes rules on wetland restoration and stipulates tough punishments, which will help deter illegal occupation of wetlands, he said. According to the new law, wetland areas classified as "important" would be divided into national and provincial ones, while the rest would be classified as "general" wetlands. The "important" wetlands would be brought under the country's ecological conservation red lines. The country's forestry and grassland authorities and other government departments would release a national catalog of important wetlands. Provincial-level governments are responsible for issuing their catalogs of important wetlands. The law prohibits activities that destroy natural wetlands and their ecosystem function, such as reclamation, drainage and permanent blockage of water sources. With a dedicated national law, the country's wetlands are given "an identity and independent status," Yang Zhaoxia, a BFU law professor, told Caixin. Previously, the country had formulated specific legislation on forests and grasslands, while legal provisions for wetlands were scattered among several different legislations, which led to discrepancy and lack of unified protection, he said. The absence of a specific national law on wetland protection was a matter of concern for the country's environmental inspectors, who early this year flagged the "serious delay" in the legislative process. The work was initiated as early as 2006, while the State Council in 2016 issued a document urging the process to be completed, the inspectors noted. With the law passed, the next steps include raising awareness of the provisions among governments across the country, issuing specific rules to supplement the law's implementation, and enhancing enforcement, Yang, the professor, noted.
CPC leadership stresses enhancing historical confidence, unity, fighting spirit (Xinhua)
2021-12-28
For Xi, actions speak louder than words (China Daily)
2021-12-28
Omicron and the Winter Olympics – is China's zero-Covid strategy up to the challenges? (SCMP)
2021-12-27
Xi emphasizes steps to ensure food security (China Daily)
2021-12-27
Chinese Livestreamers' Tax Evasion Calls for Systematic Tax Reform (Caixin)
2021-12-27
China's recent record fine on a top celebrity livestreamer signals that the authorities are tightening taxation on high-income individuals, but to close a loophole that enables tax evasion in the booming but underregulated sector, a formal tax system revamp is necessary, tax experts said. Huang Wei, one of the highest-earning livestreamers, known online as "Weiya," was ordered to pay 1.34 billion yuan ($210 million) in back taxes, late fees, and fines after tax authorities in the eastern city of Hangzhou found she avoided taxes totaling 643 million yuan in 2019 and 2020. The case followed a combined 93.2 million yuan of fines imposed in November on two other influential livestreamers for income tax evasion. In all cases, the livestreamers evaded taxes mainly by setting up multiple sole-proprietorship companies and partnerships and reporting commission income and spot fees as more lightly taxed business income, the tax authorities said. Livestreaming e-commerce took off in China in 2019, creating celebrity livestreamers who have grown so adept as pitchmen that they sometimes sell out the entire inventory of a product during a single sales session. Brands can pay tens of thousands of yuan in spot fees to livestreamers for one pitch, as well as handing over a cut of product sales as commission. Under China's tax law, individual wages, remuneration for labor services, and authors' remuneration and royalties are taxed at rates of up to 45%, while income earned by individuals from privately owned businesses, sole proprietorships or partnerships is generally taxed at progressive rates of 5% to 35%. In addition, China doesn't levy business income tax on sole proprietorships. So, setting up a sole proprietorship in the form of a studio is a common move by livestreamers and entertainers seeking to cut their taxes. However, generally speaking, the difference in tax rates is not that big in practice regardless of whether livestreamers choose to pay tax based on labor remuneration or based on business income, several tax professionals told Caixin. This is reasonable, said senior tax planner Jin Ni, because if the same income can be taxed very differently by simply changing the income type, it indicates flaws in tax system design, which violates the principle of fairness. Many entertainers and livestreamers prefer to pay business income tax because some local tax authorities allow businesses to estimate their taxable income, and then the authorities make a tax assessment. Under this method, the tax rate is usually less than 10%, the tax professionals said. The tax assessment method is designed for small businesses that are unable to furnish complete audited financials and are unable to compute taxable income correctly; therefore tax authorities assess their taxes payable based on the companies' revenues. But in practice, some local governments abuse this method to attract celebrities to base their companies there. In 2018, after leading Chinese actress Fan Bingbing, who is best known to American audiences for her role in the "X-Men" franchise, was found evading hundreds of millions of yuan in taxes in this way, authorities banned the use of the method of assessment in determining business income tax for entertainers' studio-type businesses. But this method is still widely used by livestreamers. Weiya's sole-proprietorship companies and partnerships probably used this approach to assess taxable income, tax professionals interviewed by Caixin said. Otherwise she couldn't have possibly avoided so much taxes, they said. As part of a crackdown on tax evasion targeting individuals and businesses in the entertainment industry following several high-profile cases, the State Taxation Administration (STA) issued a notice in September, specifying that studios and companies established by entertainers and livestreamers should be guided to complete their accounting books in accordance with laws and regulations, and be taxed by auditing their accounting books. The STA said it will conduct regular inspections of top entertainers, including online influencers and their studios and related businesses, and set the year end as the deadline for voluntarily reporting and correcting any tax violations. Since the fine on Weiya, more than 1,000 livestreamers have scrambled to pay back taxes, according to the government-run Xinhua News Agency. Several top influencers, including Li Jiaqi, have paid more than 5 billion yuan of combined taxes, the person close to the Weiya case said. Meanwhile, tax authorities in Shanghai, Zhejiang, Jiangsu, Beijing, and Guangdong reiterated the year end deadline for entertainers and livestreamers to conduct self-reviews on their taxes. The platform economy is an important new form of economic development and tax violations by some livestreamers has disrupted tax collection and destroyed fair competition, the tax authorities said. When Hou Kai, the auditor general of the National Audit Office, reported on audit reform to the Standing Committee of the National People's Congress on December 21, he singled out the problem stemming from use of the tax assessment method on high-income individuals. The STA will select locations with heavy use of this taxing method as pilot sites to require audited financial accounts instead of the current tax assessment method on certain sole-proprietorship companies and partnerships, Hou said. A key to livestreamers' self-reviews is defining remuneration for labor services and distinguishing it from income from business operations. China's individual income tax law has wide definitions for remuneration for labor services and some of them overlap with income from business operations. Labor services include design, film and television, audio recording, video recording, performance, advertising, exhibition, intermediary services, brokerage, and other services. However, as a new form of business, there is no clarity on whether livestreamers' revenue should be designated labor service remuneration or business operation income. In Weiya's case, Hangzhou's tax authorities for the first time clarified the loophole by defining commissions and spot fees paid by brands to livestreamers as remuneration for labor services. The Weiya case fired a warning shot over the livestreaming industry and will set the tone for other livestreamers' self-reviews, but it's too early to say whether all commissions and spot fees are to be classified as remuneration for labor services, several tax experts told Caixin. Tax experts agree that if livestreamers sign contracts in their own names and provide services, their revenue should be remuneration for labor services; if they set up sole-proprietorship companies and partnerships and sign contracts and carry out business activities in the name of the companies, the revenue can be classified as business income; but if their companies are registered only as shell companies without actual operations, the revenue can't be reported as business income. For example, these companies must have staff, physical offices, and actual business activities. Otherwise, even if the contracts are signed under the companies' names, the revenue still can't be regarded as business income, said Shi Zhengwen, director of the research center for fiscal and tax law at China University of Political Science and Law. In the 2018 tax inspections on the show business industry after the Fan tax evasion scandal, inspectors found entertainers flocked to Khorgas in the Xinjiang Uygur autonomous region to register studios and production and distribution firms. The small northwestern border city has become a tax haven after it was granted special economic zone status in 2010, which allowed it to offer generous tax benefits including tax exemptions to entertainment companies registered there. Many of these company have no actual operations there. Now the livestreaming industry has similar problems. Many livestreamers' companies are registered at places far from where their actual business are located. For example,in November, the Hangzhou tax authorities slapped a combined 93.2 million yuan in fines on Zhu Chenhui, who goes by the screen name "Xueli Cherie," and Lin Shanshan, known as "Lin Shanshan Sunny," for income tax evasion, the first of its kind in the sector. The two livestreamers set up 10 sole proprietorship companies in cities including Beihai in Guangxi province and Yichun in Jiangxi province. "Most of livestreaming activities happen in Hangzhou. Why did they register their companies in Guangxi and Jiangxi?" asked a tax expert. "The only purpose is to evade taxes." Another way to distinguish labor remuneration from business income is to see whether the taxable activities are actually an individual's independent labor, based on the individual's independent decision and responsibility, tax experts said. The key is visible in the process of providing services -- what role the individual plays and how to share risks and costs, Shi said. If brands value the livestreamer's personal image rather than his or her studio, it is more appropriate to define the income as remuneration of labor, he said. Currently, the legal relationships between livestreamers, e-commerce platforms, brands, suppliers and other related parties are completely unclear. Livestreamers may use different business models to promote products. There is no consensus on whether their pitching behavior is defined as sales or advertising. The Cyberspace Administration of China issued trial guidelines for livestreaming effective in May, defining people selling goods to the public via internet livestreaming as livestreaming marketers. But in practice, some livestreamers are also operators of livestreaming studios. For example, Weiya's livestreaming company Qianxun (Hangzhou) Holding Co. Ltd. also represents more than 50 other livestreamers, according to the company's website. After the self-review and voluntarily payback, a more imminent question is how to explore a reasonable and predictable taxation mode for the industry. "Regulating the taxation of the livestreaming industry is a systematic project," Shi said. While a centralized crackdown is necessary, it is more important to launch a comprehensive and fundamental institutional construction, he suggested. It is necessary to promote the reform of the tax system, adjust tax policies, and improve tax collection measures, in combination with the campaign of tax inspection, Shi said. In tax collection, the interests of central and local governments sometimes do not coincide. For example, using the tax assessment method can attract companies, with the potential to boost local governments' tax revenue. But as individual income, tax revenues are shared between the central and local governments. Tax evasion by the high-income individuals can reduce the central government's fiscal revenue. This practice not only affects competition between regions, but also reduces the available resources for the governments to provide public services, tax experts said. In recent years, authorities have tightened tax regulation on the high-income group. In general, the higher the income, the more tax is paid. Therefore, the high-income group is more motivated to find ways to avoid paying more taxes. In the future, the scope of comprehensive income tax should be expanded and include business income, Shi suggested. "The larger the scope of comprehensive income is, the easier it is to eliminate the practice of tax evasion by changing the nature of income," he said. Tax scholars have also called for a unified tax rate for business income, individual remuneration for labor services, and wage income. "As long as there are differences, taxpayers will be motivated to study how to avoid paying more taxes. Some of these ways are legal and some are illegal," said Jiao Ruijin, former deputy secretary general of the Chinese Tax Institute. Tax experts also suggest lowering the maximum tax rate of 45% on individual income. "High tax rates encourage tax evasion, while low tax rates encourage compliance," Shi said. "It is not that the higher the tax rate is set, the more tax the country will collect." A reasonable tax burden is beneficial for both the taxpayers and the collector, he said.
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China's jobseekers search for 'stability' as coronavirus and regulatory crackdowns take toll (SCMP)
2021-12-30
China issues first white paper on export controls (Xinhua)
2021-12-29
China's Land Sales Still Sluggish Despite Relaxed Auction Rules (Caixin)
2021-12-28
China's land market remains sluggish following a slump that started mid-year even as local governments began relaxing restrictions on auctions to attract reluctant cash-strapped private developers. In the fourth quarter as of Dec. 20, the average transaction price at land auctions in 300 major cities was only 3% higher than the average starting price, falling from 17% and 8% in the second and third quarters, respectively, according to a report released by real estate data collector China Real Estate Information Corp. (CRIC). Land auctions have cooled due to the reluctance of property firms amid an ongoing deleveraging campaign by regulators and enforcement of strict auction rules. The weak land sales have squeezed the fiscal revenue of local governments as they are one of their major sources of income. Last month, government revenue nationwide from land sales dropped 10% year-on-year to 825.4 billion yuan ($129.6 billion), the fifth consecutive monthly decline, according to Caixin calculations based on data from the Ministry of Finance. In an attempt to spur buyer interest, during the latest auctions a number of cities including Hangzhou, Shanghai and Shenzhen relaxed rules, such as lowering the amount of earnest money that property firms have to pay before an auction, allowing the winners of the auctions to pay by installment instead of a one-off transaction, or lowering the down payment. Relaxing the requirements on payment essentially reduces developers' costs, an investment manager at a large state-owned property firm told Caixin. As the end of the year approaches, private firms are especially sensitive to costs, the manager said. Amid the relaxation of rules, the market has developed along divergent paths as land sales rebounded in some relatively wealthy cities while continuing to cool in less developed regions. In Hangzhou, the capital of the eastern province of Zhejiang, 35 land parcels were sold out during the latest auction that closed on Wednesday for a combined 76.2 billion yuan ($12 billion), an improvement from the October auction in which only 14 of the planned 31 parcels were sold. But in Shenyang and Changchun, two large cities in the poorer Northeast China region, 70% and 82% of land parcels went unsold in their December auctions, respectively, rising from 57% and 38% for the previous auctions, the CRIC report shows. Besides relaxing auction rules, some local governments negotiated with companies in advance to attract bidders. Before the latest auction, authorities in Hangzhou visited major local property firms and encouraged them to bid, one local market participant said. In Shenzhen, local authorities met with developers before the latest auction and listened to their issues with land purchases and real estate development, and promised the government would try to help, said the investment manager at the state-owned property firm who attended the meeting. Authorities are worried about the risks posed by potential failed auctions, the manager said. As private property firms have been reluctant to bid, state-owned enterprises (SOEs), including local government financing vehicles (LGFVs), have stepped in to underpin the market. LGFVs became major bidders during the latest land auctions, analysts at Zheshang Securities Co. Ltd. wrote in a note earlier this month. Of the 12 cities that had finished the latest round of auctions as of Dec. 12, LGFVs made up at least half of the bidders at six, according to calculations by the Zheshang Securities analysts. Last month, a consortium of five SOEs including LGFVs bought a land parcel in a southern province for 8.8 billion yuan. An insider at one of the LGFVs said they bought the land just to help the local government ease its revenue crunch, and that they did not have a plan to build anything on it. "Property firms would remain cautious about buying land next year as most companies are still struggling with liquidity," the CRIC report said. They are expected to concentrate investment in high-quality cities such as Beijing, Shanghai and Hangzhou because those cities have stable population inflows and strong demand for housing, it said. The recent government efforts to prevent the liquidity-strapped real estate market from falling into deeper turmoil come as economists flag concerns that the property slowdown is dragging down economic growth. The past few months have been a turbulent time for the entire property market, including both housing and land, as regulators' deleveraging campaign triggered a liquidity crisis at a number of debt-ridden private property firms. In recent weeks, however, policymakers have tried to restore market confidence, while state regulators and local governments have eased some curbs on financing and other aspects for developers and homebuyers. Despite this support, the real estate market is still cooling with sales dropping and inventories rising. Many private developers continue to struggle with the liquidity crunch and mountains of debt. With that in mind, some analysts estimate that property investment and land purchases by developers will fall next year, and authorities will have to further ease policy curbs.
China shortens negative lists for foreign investment for 5th straight year (Xinhua)
2021-12-27
Stable course charted for economy next year (China Daily)
2021-12-27
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