Taxation in China 1997/98 (review)

574 China Review International: Vol. 5, No. 2, Fall 1998 Wang Xuanhui. Taxation in China 1997/98. Hong Kong: FT Law and Tax Asia Pacific, 1997. ?, 26? pp. Paperback, isbn 962-661-003-4· Since the early 1980s, the laws of the People's Republic of China (PRC) governing foreign-related business activity have increased exponentially in terms ofboth number and complexity. This was in no small part due to the phenomenal expansion of the PRCs economy. However, as equity joint ventures gave way (in part) to more flexible cooperative or contractual joint ventures and, more recentiy, to entities such as wholly-owned foreign enterprises and joint-stock limited liability companies, die development of the PRCs business laws regulating these entities could only be described as ad hoc. Tax laws followed suit. It comes as no surprise, therefore, that enormous pressure was placed on the PRCs fledgling tax system during this time. By the late 1980s a panoply ofregulations governed the taxation of foreign-related business transactions in the PRC, witii tax treatment very much dependent on the type of entity and the location and type of the business activity. Combined with a plethora ofboth authorized and unauthorized tax breaks offered by local governments in an increasingly competitive market to attract foreign investment, the PRCs numerous tax regimes and sub-regimes appeared Byzantine. Partially in response to this situation, tax reform in the PRC became an imperative . The first significant step took place in 1991, when the taxation ofbusiness income derived by foreign investment enterprises and by foreign entities from sources in the PRC became governed by the same law.1 This was followed in late 1992 by the enactment of a truly unified law on taxation administration and collection,2 applying to domestic entities and foreign enterprises alike. Within a further short period oftime, a major tax reform package was implemented on 1 January 1994, which, among other things, (1) allocated responsibility between central and local taxation bureaus for administering and collecting national and local taxes,3 (2) enacted an individual income tax law that in most respects treated foreigners and PRC domiciliarles in the same manner,4 and (3) enacted a broadbased system ofindirect taxation, again generally applying to both foreign enterprises and PRC entities alike.5 Given this historical background and the recent and many important changes to the taxation laws ofthe PRC, it is pleasing to report that the legislative amendments arising from the law reforms of 1991 to 1994 have been adequately reflected© 1998 by University and explained in Taxation in China 1997/98. For this reason alone, this volume ofHawai'i Presscould be added to the library of the researcher on PRC economic law, and to the business community and advisers interested in PRC taxation generally. Reviews 575 The avowed aim of Taxation in China is to offer a detailed explanation of China's current tax law and regulations. It also promises to include a number of case studies to demonstrate actual practice and shows the procedures for assessment . Does the book fulfill these promises? The initial, and abiding, impressions upon reading Taxation in China are diat it can best be classified as an introductory guide to die PRCs increasingly complex tax system. Chapter by chapter, it summarizes all the main taxes applicable to foreign investment in the PRC, including die trilogy ofindirect taxes that have proved so important—and controversial —since they were introduced in 1994. The book concludes widi a fairly detailed but eclectic chapter on the tax treaties to which the PRC is a party: tax sparing is considered in detail; transfer pricing, competent authority procedures, and die exchange ofinformation are not considered at all. Worked examples appear throughout the text. They are generally helpful.6 On the negative side, it must be said that Taxation in China can hardly be called well documented. There are virtually no references to specific provisions of the relevant taxation laws, regulations, and rules and no reference to the very important interpretative notices issued by relevant government bodies, aldiough some are obviously incorporated into die text. Indeed, die full text ofover 250 pages contains not one footnote or bibliographic reference. In common with so many...