- BURS says meetings with Chinese community on tax evasion attitudes fruitful
- Chinese Association has undertaken to translate tax law into Chinese
- BURS hopes mandatory electronic billing machine to monitor transactions will work
According to BURS, this is because the Chinese Association has made several undertakings to promote compliance by their members, including translating the tax law into their language (at their own expense) for their members who often cite language barriers as an excuse for their transgressions.
“We are concerned about lack of compliance by a good number of Chinese nationals,” said Segolo Lekau, one of the commissioner general’s deputies told editors in a briefing this week. “This is not to say they are the only ones we are concerned about. We met recently with their association to raise this complaint and we are hopeful that the meeting will bear fruit. They have even made promises to translate the tax law for their citizens’ ease of reference.”
Buttressing her deputy’s views, the Commissioner General Jeanette Makgolo said she hopes BURS’s constant conflict with some Chinese nationals is over. “We have also put mechanisms in place to curb tax avoidance, among those being the Electronic Billing Machines (EBMs) that enable revenue authorities to monitor formal business transactions and offer the potential to improve VAT compliance,” Makgolo noted. “Enforcement and monitoring will be robust.”
Many governments around the world have introduced Electronic Billing Machines(EBMs) to combat non-compliance with VAT by monitoring business transactions. The key challenge to low EBM impacts, however, is said to be non-utilisation of the EBMs for receipt issuing by business operators as a means of cheating the system.
Rwanda case study
In August 2013, Rwanda adopted a new law to compel all businesses registered for VAT to provide customers, at each sale, a certified VAT receipt generated by a third-generation EFD: the Electronic Billing Machine, which contains a Sales Data Controller (SDC) with GPRS and a Certified Invoicing System (CIS) all working together.
This must be purchased from a Rwanda Revenue Authority (RRA)-approved vendor and activated by the RRA. A study by Victor Steenbergen says the rollout of the EBMs started in March 2013 in Rwanda and was extremely rapid. By September 2014, 18 months after initiating the rollout, over 3,943 taxpaying firms had active EBMS. This corresponded to 77.8 percent of all VAT-registered firms at that time. But experts say these devices should not be seen as a “silver bullet” of tax administration because the deployment of fiscal devices alone cannot achieve meaningful results, whether in terms of revenue gains or permanent compliance improvements.
The case of Rwanda further shows that EBMs alone do not have a large impact on VAT compliance because they do not form a true third-party reporting system: firms can still choose not to comply by not issuing EBM receipts. “They find that on average, the introduction of EBMs resulted in a VAT increase of 5.4 percent- a relatively little, and much lower percentage than expected which occurred to cheating the system,” observed Steenbergen in his study.
China warns citizens
Last year the Chinese State Taxation Administration issued a stern warning in a statement to its citizens that tax evaders would be “severely punished” as Beijing pushes for “common prosperity”.
Authorities will carry out more spot inspections and give greater exposure to tax crimes to enhance compliance, the State Taxation Administration said at its annual conference. “We will severely punish all kinds of tax evasion and show no forgiveness,” continued the statement.
The penalty for tax evasion in China
Despite some of its nationals being keen on tax fraud, China laws are very strict and effective. Under the current tax law, for taxpayers who evade taxes, the tax authorities will seek the payment of the unpaid or underpaid taxes and late payment penalty (usually 0.05 percent per day of tax), and concurrently impose a fine not less than 50 percent of and not more than five times the amount of taxes unpaid, according o research.
At its 2021 annual meeting, the State Taxation Administration revealed that they had punished 440,000 companies suspected of tax fraud and recovered 90.9 billion yuan in 2021, beating the 2020 figures of 322,300 and 85 billion yuan respectively.