Policy Interpretation: Measures on Publicizing Information of Serious Tax-Dishonest Entities

Recently, the State Administration of Taxation announced the "Measures for the Administration of Public Disclosure of Information on Major Tax Law Violation Dishonest Subjects" (Order No. 54 of the State Administration of Taxation). The following is an interpretation of the relevant matters:

I. Background of the revision

In order to implement the "Opinions on Further Deepening the Reform of Tax Collection and Administration" of the General Office of the CPC Central Committee and the General Office of the State Council and the "Guiding Opinions of the General Office of the State Council on Further Improving the Dishonesty Constraint System and Building a Long‑term Mechanism for Integrity Construction" (Guo Ban Fa [2020] No. 49), to further promote the management of major tax law violation and dishonest cases, standardise management procedures, constrain administrative power, effectively protect the legitimate rights and interests of administrative counterparts, and better leverage the role of the tax integrity mechanism in stimulating market vitality and creating a sound business environment, the State Administration of Taxation has revised the "Measures for Public Disclosure of Information on Major Tax Law Violation Cases" (Announcement of the State Administration of Taxation [2018] No. 54, hereinafter referred to as the original Measures) and renamed it as the "Measures for the Administration of Public Disclosure of Information on Major Tax Law Violation Dishonest Subjects", which is issued and implemented in the form of a departmental rule.

In 2014, the State Administration of Taxation formulated the "Measures for Public Disclosure of Information on Major Tax Law Violation Cases (Trial)". In 2016 and 2018, the State Administration of Taxation revised the Measures twice. Since its implementation, the original Measures have played an important role in deterring tax violations and guiding law‑abiding and honest tax payment, achieving good results. In recent years, the State Council has made new arrangements and put forward new requirements for improving the dishonesty constraint system and building a long‑term mechanism for integrity construction. The original Measures have some deficiencies in the determination of dishonest subjects and the standardisation of restoration procedures, making revision and improvement necessary.

II. Principles of the revision

(1) Effectively strengthening protection of rights. The protection of the legitimate rights and interests of the parties runs through the entire process of public disclosure of dishonest information. Before the decision to determine a dishonest subject is made, the right to information is guaranteed by informing the party of the relevant reasons, basis, proposed disciplinary measures, and rights enjoyed by law; during the process, the right to object is guaranteed by timely reviewing the party's statements and arguments; after the decision, the right to apply for early cessation of disclosure is guaranteed by timely accepting, reviewing, and notifying the result of the review.

(2) Strictly constraining law enforcement actions. The relevant law enforcement procedures for the determination of dishonest subjects, dishonesty disciplinary measures, and early cessation of public disclosure are comprehensively standardised. The powers and responsibilities of tax authorities at all levels are clarified, and the work processes in the determination of dishonest subjects, information disclosure, credit restoration, and other stages are detailed to ensure that the relevant work operates within the framework of the rule of law.

(3) Focusing on solving practical problems. The revision focuses on solving problems encountered in the implementation of the original Measures, such as: appropriately raising the amount thresholds for some violations included in the scope of dishonest subjects to ensure proportionality between the offence and the penalty; and adapting to the new situation of tax collection and administration by including illegal tax agents and relevant parties who assist in tax evasion and fraud as dishonest subjects.

III. Key points of the revision

These Measures consist of five chapters (General Provisions, Determination of Dishonest Subjects, Information Disclosure, Early Cessation of Disclosure, Supplementary Provisions) with a total of 27 articles. The main revisions include:

(1) Adding the phrase "protecting the legitimate rights and interests of tax administrative counterparts" to the legislative purpose. In Article 1, "protecting the legitimate rights and interests of tax administrative counterparts" is included as one of the legislative purposes, fully implementing the requirement in the "Opinions on Further Deepening the Reform of Tax Collection and Administration" to safeguard the legitimate rights and interests of taxpayers and fee payers.

(2) Adding protection for personal information of dishonest subjects. In accordance with the requirements of the "Regulations on Optimising the Business Environment", Article 4 clarifies that tax authorities shall keep confidential commercial secrets, personal privacy, and personal information learned in the course of administering the public disclosure of information on dishonest subjects.

(3) Clarifying the criteria for determining dishonest subjects. Fully considering the consistency and rationality of the determination, in Article 6 on the criteria for determining dishonest subjects, the amount for evasion of recovery of tax arrears is raised from RMB 100,000 to RMB 1 million or more, and the amount for falsely issuing ordinary VAT invoices is raised to RMB 4 million or more. At the same time, four categories of tax law violators are included as dishonest subjects: withholding agents who fail to pay or underpay tax already withheld or collected in an amount of RMB 1 million or more; tax‑related parties who illegally provide convenience to taxpayers or withholding agents, resulting in non‑payment or underpayment of tax of RMB 1 million or more or fraudulently obtaining state export tax refunds; and tax agents who cause taxpayers to fail to pay or underpay tax of RMB 1 million or more.

(4) Clarifying provisions to protect the parties' right to information and the right to make statements and arguments. Article 8 stipulates that the tax authority shall inform the party of their statutory rights before determining a dishonest subject. Article 9 adds a provision for timely review of the party's statements and arguments, ensuring the protection of legitimate rights and interests.

(5) Adding time limits for determining dishonest subjects and publicly disclosing their information. Article 10 stipulates that the tax authority shall prepare the document determining the dishonest subject within 30 days after the expiry of the relevant time limit or after the relevant document becomes effective. Article 11 stipulates that the tax authority shall publicly disclose the dishonest information within 15 days of the month following the service of the document determining the dishonest subject.

(6) Adding circumstances under which the dishonest subject shall not be disclosed. Article 11 provides exceptions to the disclosure of dishonest subjects, namely, information that is classified as state secrets by law, information prohibited from disclosure by laws and administrative regulations, and information that, if disclosed, may endanger national security, public security, economic security, or social stability, shall not be publicly disclosed by tax authorities.

(7) Further standardising the dishonest information to be publicly disclosed. To protect the legitimate rights and interests of tax administrative counterparts, Article 12 clarifies that only the legal representative, person in charge, or actual responsible person at the time of the violation shall be disclosed, and the basic information of tax‑related professional service institutions and practitioners who bear direct responsibility for major tax law violation and dishonest cases will no longer be disclosed.

(8) Clearly stipulating the conditions for applying for early cessation of disclosure. To encourage dishonest subjects to proactively correct their violations, actively assume social responsibilities, and rebuild good credit, Article 18 explicitly provides that dishonest subjects who meet three categories of conditions may apply to the tax authority for early cessation of public disclosure.

(9) Clarifying the materials to be submitted when applying for early cessation. To reduce the tax compliance burden on the parties, in accordance with the principle of necessity, Article 19 specifies the materials that parties should submit under different circumstances when applying for early cessation.

(10) Strengthening the approval procedures for early cessation. Articles 20, 21, and 23 stipulate that if a dishonest subject who meets the conditions applies for early cessation, the tax authority shall, upon approval by the bureau head at the prescribed level, make a decision to grant early cessation within 15 days of acceptance and cease public disclosure within 5 days.

(11) Adding circumstances under which early cessation shall not be granted. To reflect "a balance between leniency and severity" and "proportionate punishment", Article 22 stipulates that early cessation shall not be granted to those who have been determined as dishonest subjects two or more times within five years, or who have been subjected to penalties for tax violations such as tax evasion, avoidance of recovery of arrears, fraudulently obtaining export refunds, resisting tax payment, or falsely issuing invoices after being determined as a dishonest subject.

(12) Adding provisions on credit training. Article 24 stipulates that tax authorities may organise the legal representatives and financial persons in charge of dishonest subjects that have applied for early cessation to participate in credit training, thereby providing positive guidance to dishonest subjects.