China gets tough on illegal charges

China's top market regulator and other authorities have issued a notice ordering related institutions to further clear unauthorized charges on enterprises, the latest move to guarantee that tax and fee cut measures are fully put into place.

The notice ordered all departments affiliated to the State Council, China's cabinet, to carry out self-inspection to eliminate illegitimate charges on enterprises by taking advantage of administrative power, Gan Lin, vice-minister of the State Administration for Market Regulation, said at a news briefing on Aug 5.

According to the notice, the China Banking and Insurance Regulatory Commission should firmly clear commercial banks' illegitimate charges on enterprises, while local governments should disclose the categories, standards, grounds and attributes of all kinds of corporate charges levied by their affiliates, Gan said.

The notice was jointly issued on Aug 3 by the State Administration for Market Regulation, the National Development and Reform Commission and other authorities.

This came in as the practical measures to carry out the requirements of a meeting held by the State Council in late July, which decided to strengthen efforts to remedy illegitimate charging on businesses to ensure the effectiveness of tax and fee cuts.

"If the problem of unauthorized corporate charges cannot be solved thoroughly, enterprises may pay fees doubtfully and even be forced to pay, lowering their expectations over tax and fee cut policies and dampening the policy impact," said Gan, citing that tax and fee cuts are the key measures to counter economic downside pressure.

The notice also ordered the establishment of a working system to efficiently deal with denouncements of unauthorized charges and conduct punishments accordingly, and to cancel every unfounded governmental requirement for enterprises to accept services provided by third parties, Gan said.

In the first six months, China's newly introduced tax and fee cuts have saved businesses 1.17 trillion yuan ($166 billion), partially completing its annual plan to cut nearly 2 trillion yuan worth of tax and fees on enterprises, said data from the State Taxation Administration.

In recent years, the country has stepped up efforts to tackle unauthorized fees levied on businesses, with the State Administration for Market Regulation having detected and dealt with 620 million yuan worth of illegitimate corporate fees in its inspection last year.

"Incorporating the payment of various types of fees, such as labor union fees and city cleaning fees, onto the online taxation platform has helped to slash arbitrary charging by local taxation officials in recent years," said a representative of a Nantong, Jiangsu province-based textile manufacturer.
Jiangsu province has taken the lead in eliminating illegitimate charges, he added.

Liu Chunsheng, an associate professor at the Central University of Finance and Economics, said the situation of illegitimate charging may differ markedly in different places and called for unified rules to regulate local taxation officials' behavior.

"Various innovative taxation measures to improve the business environment have been announced by the central government. Local officials, however, may find the measures complex and a challenge to their administrative power," Liu said.

"This made efforts to guarantee that tax and fee cuts are fully put into place and to remedy illegitimate charges all the more important," Liu said.