Tax Evasion: The Helpless Policy Of Enterprises

Zhou Xiaoguang, chairman of the National People's Congress and chairman of Xinguang holding group, admitted that the tax burden was too heavy in an interview with reporters.

He said that the comprehensive calculation of the cost of taxes and fees accounted for about 30% of the operating cost of enterprises, plus implicit, about 35%.

Zhou Xiaoguang believes that the small profits and even negative profits of enterprises can only result in positive recession, lack of confidence, no space to improve employee welfare, raise wages and attract talents, and there is no room for R & D, market expansion and brand upgrading.

It is precisely because of the heavy burden of corporate tax that Chen Wanzhi, deputy to the National People's Congress, put forward a proposal to "structure tax cuts and reduce overall tax burden".

He pointed out that in recent years, China's fiscal revenue has maintained rapid growth, so that wealth has gathered to the government, which has seriously squeezed national income, and the income of ordinary people has taken up.

Although China has implemented a series of tax reduction measures in recent years, small and medium-sized enterprises have not really enjoyed the benefits of tax reduction in the specific implementation.

Members of the Committee interviewed by reporters generally indicated that tax cuts for SMEs should continue in depth.

Overburdened Enterprises

Cui Yongjian, who has been doing business for his father, admitted that he is going through a dilemma of getting narrower and narrower.

Cui's father is a boss of a clothing enterprise in Yiwu, Zhejiang. Although there are two to thirty million business income every year, there are few profits left after deducting all kinds of costs and taxes.

Cui Yongjian told reporters that the monthly business income of 2 million, the enterprise to pay taxes and fees to reach 15%, including 17% VAT, 15% corporate income tax, and urban construction tax, education surcharge, stamp duty, property tax and so on. Besides taxes and fees, plus raw material costs, workers' wages and a series of hidden costs, the net profit of enterprises can only reach 5%-8%.

Coupled with the appreciation of the renminbi since the financial crisis, the increase in raw material prices and the increase in labour costs, enterprises that have already made marginal profits have not been profitable for several months.

"To the state's taxes and fees to more than 10%, I can not even get 2% of the profits, do not want to go on."

Cui Yongjian said.

Under the current tax system which is mainly based on the turnover tax, the heavy burden of taxes and fees has become a problem in the whole industry.

According to the survey conducted by the China clothing association, the average annual tax paid by clothing enterprises is 8.32% of the total operating revenue, while the average sales profit of Enterprises above designated size is only 5.75%.

Especially in processing enterprises, the total annual tax payment is usually higher than the after tax profit, and some even higher than the profit after tax 2-3 times.

The heavy tax burden and the continuous increase in the cost of labor in recent years are already small profits.

In fact, not only the clothing industry, but also Zhejiang, Guangdong, Beijing and other places where the reporters interviewed are all called the tax burden too heavy. Many enterprises have no choice but to choose tax evasion.

{page_break}

In order to survive, escape!

Reporters learned in the interview that most of the SMEs in the Pearl River Delta and Yangtze River Delta tend to cash pactions.

Only listed companies and some large regulated enterprises will require their upstream enterprises to provide invoices.

Cao Haixia is one of the typical representatives.

As the boss of a small machine manufacturing enterprise, she needs to pay all taxes and fees that the productive enterprises need to pay, including value-added tax, income tax, urban construction tax, educational surcharge, etc., which is calculated to achieve more than 15% of business income.

If taxes and fees are paid in full, she will probably be busy all year round, or even lose money.

So she chose almost all enterprises to take the road of tax evasion.

In order to reduce the cost of taxes and fees, Cao Haixia almost never asked the raw material supply enterprises to issue VAT invoices, because Invoicing according to the prevailing practice in the industry means that buyers should pay 17% of the value added tax.

Similarly, in addition to the special needs of customers, enterprises rarely offer VAT invoices for customers, and enterprises needing invoices in accordance with industry rules also need to pay 17% more VAT expenditure.

The result is that in the industry, the tax turnover is only half or even 1/3 of the actual turnover, and the cost savings become a large part of their actual profits.

Reporter survey found that not only Cao Haixia's industry, the Yangtze River Delta, Pearl River Delta economic developed areas also the same.

Wang Yong is a boss of a plastic processing enterprise in Fenghua, Ningbo. The fixed assets of the company are around 10 million yuan, and the annual output value is between 5 million yuan and 6 million yuan.

Every year, he will probably buy about 2000000 yuan invoices to offset the value added tax, and the remaining about 3000000 yuan invoices must pay VAT by 17%, which is also a common tax evasion method for many enterprises.

The heavy tax burden has resulted in many enterprises' non-standard tax evasion strategies, but in the long run, this is doubtless harmful to the healthy development of enterprises.

This reporter learned from the Guangzhou Zhongda market business circle that the business volume of the business circle is very common.

But most of these operators exist in the form of self-employed households, and the reason is that the tax system of self-employed households has greatly reduced their tax burden costs.

But Zhu Qingguo, President of the China Textile Industry Association, has always been worried about the growth and upgrading of China's big cloth market. He hopes that these self-employed owners will be able to realize the corporatization and brand management at an early date.

However, after a systematic investigation and study, the chamber found that the biggest obstacle to the upgrading of the business circle of Zhongda Bu market is not the quality and concept of the operators, but that these self-employed owners are well aware of the tax risks faced by the pformation from the self-employed to the corporatization operation.

They generally believe that few people can support it if they pay taxes according to the existing tax system.

The truth of tax cuts

The tax burden of enterprises is too heavy, which affects the development of enterprises, especially small and medium-sized enterprises.

Since 2008, in order to cope with the international financial crisis and promote national development, the government has introduced a series of tax reduction policies.

But it is worth pondering that structural tax cuts that China has been making in recent years has not changed the fast growth of fiscal revenue.

In 2011, even though a number of tax reduction policies were introduced, the annual fiscal revenue reached 103740 billion yuan, an increase of 24.8%, representing a 4.1 percentage point increase in GDP share compared to 20.7% in 2010.

An important reason for this situation is that most of the tax cuts that have been introduced are mostly limited, and the effect of tax cuts is limited.

Sun Gang, director of the tax Science Research Institute of the Ministry of finance, believes that the scope of these tax cuts is relatively small.

Value added tax and business tax increase is the target of individuals, and individuals in the tax law refer to individual businesses or natural persons. Only those two people apply to raise the threshold. Many small and micro enterprises can not enjoy preferential treatment.

In addition, Sun Gang believes that the scope of tax cuts is not large.

Zun Zongshen, a member of the CPPCC National Committee, made clear in his motion that since 2008, structural tax cuts have played a role in resisting the international financial crisis and promoting the development of the national economy.

But such structural tax cuts only play an auxiliary role in increasing government spending and expanding public investment. This role and role have not yet been substantially changed.

Zun Zongshen pointed out that structural tax reduction measures were not mainly aimed at small and medium enterprises. Business tax, value-added tax and personal income tax adjustment were not specifically designed for small and medium-sized enterprises.

The recent tax cuts specifically targeted at small and medium-sized enterprises are only a direct extension or a slight relaxation of the original policies.

Moreover, small and medium-sized enterprises have a large deficit, so it is difficult to really enjoy the preferential tax reduction policy of enterprise income tax.

Even the attention paid to the pformation and expansion of value-added tax and the adjustment of individual income tax deduction standards are also inferior to the fast growth of tax revenue and heavy tax burden.

Take the pformation of the value-added tax, known as the 120 billion tax reduction, as an example. Since January 2009, China's value-added tax has changed from production to consumption, and the amount of fixed assets purchased by enterprises during the current period will be deducted.

However, the reform that should have been incorporated into the scope of the machinery and equipment, fixed assets, buildings and so on has been reduced. At present, it can only deduct a machine and equipment.

Therefore, this reform is seen by many as "semi pformation".

The hottest personal income tax has attracted much attention because it is direct taxation, which involves everyone's pocketbook.

In fact, in 2011, the personal tax revenue accounted for only 6.7% of the total tax revenue.

All in all, the effectiveness of some tax reduction policies has not been satisfactory. The representatives of the two conferences interviewed hope to introduce more specific and effective measures so that SMEs can really get the benefits of tax cuts.

{page_break}

Journalist observation

The reform of turnover tax is going to be bigger.

Dai, a director of a well-known clothing company with a marketing headquarters in the Pearl River Delta and Yangtze River Delta, told reporters that it is difficult to speculate on the total amount of taxes and fees coming from government departments and the proportion of their total operating costs.

"But from a direct sense, the cost of this piece is quite high."

He said.

The reason why it is difficult to calculate is that in China's tax system based on turnover tax, most enterprises will pfer the increasing tax burden through the price to the downstream enterprises.

The so-called turnover tax is a kind of tax which is based on the turnover volume of commodity circulation or the turnover of non commodity pactions.

At the beginning of the tax structure in our country, because of low personal income and basically no property income, in order to ensure the state's revenue, China adopted a tax system based on turnover tax to ensure stable and reliable financial revenue.

But on the other side of the coin is that under the fiscal and taxation system, which is basically not subject to the value-added tax and business tax, which are subject to changes in production and operating costs and expenses, enterprises will have a higher tax burden as long as production and operation are carried out.

Coupled with the restrictions on tax collection and management at the beginning of the tax reform, the tax rate setting is based on the principle of high tax rate and wide collection and management. With the progress of the levy technology, many tax categories can basically achieve full receivables, and the tax rate is relatively high.

In the current tax system of our country, value-added tax and business tax are the first and largest tax categories of the central and local governments. The two add up to 64% of the tax revenue in 2010.

Plus consumption tax, customs duties and other taxes, turnover tax accounted for more than 70%, in this tax structure, value-added tax can not be deducted in full, the tax rate is too high, business tax is repeatedly collected, this series of problems make the enterprise tax burden too high.

Under this background, many scholars explicitly put forward the problem of changing the excessive burden of tax and fee in our country. Simple minor repairs can not fundamentally change the unreasonable reality of the fiscal and taxation system. We must start with the turnover tax and lighten the burden of the enterprises, otherwise the real tax reduction will not start.

Gao Peiyong, a member of the Chinese Academy of Social Sciences of the Chinese Academy of Social Sciences for a long time, has written this view many times.

He pointed out that on the basis of the reduction of the indirect tax ratio, the tax burden of enterprises will be reduced, which will further increase the income of wage earners, and then it is possible to regulate the income distribution of high-income and low-income people through direct taxation.

The pilot reform of business tax to value added tax, that is, the pilot of value-added tax extension, is considered to be the best way to reflect the reform direction.

Gao Peiyong believes that in accordance with the current value added tax to expand the direction of reform, the new tax rate of 11% and 6% is two, and the low tax rate for newly expanded industries is actually reduced on the basis of reducing double taxation. The objective effect is to reduce the proportion of turnover tax.

The reform of value-added tax expansion has objectively reduced the proportion of indirect taxes. On this basis, the implementation of the tax reduction policy for enterprises is relatively small and more feasible.

However, from the progress of the pilot, many people think that the reduction of tax rate and tax rate can really reduce the indirect tax and reduce the tax burden.

Professor An Tifu, director of the Institute of Finance and finance of Renmin University of China, thinks that 17% of the value-added tax rate applied by most Chinese enterprises is too high and should be gradually adjusted to about 11%.

At the same time, VAT is totally replacing business tax and lowering the tax rate. It is also a common academic view to achieve the nationwide value added tax expansion and reduce duplication of taxes.