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Finance minister calls for global tax collaboration on eve of ITD

(China Daily)
Updated: 2009-10-26 07:31

A view of the Minsitry of Finance. [China Daily]

Editor's note: The third International Tax Dialogue (ITD) Global Conference opens today in Beijing. A group of senior taxation officials from several international organizations, including the World Bank, the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), the Asian Development Bank (ADB), the European Commission (EC) and the Inter-American Development Bank (IDB) are attending the event.

Prior to the official launch of the event, Minister of Finance Xie Xuren briefed China Daily reporter Yang Cheng on the background to the event and the themes likely to be discussed. He also addressed the implications of China's taxation policies and the prospects for international cooperation in the sector.

Q: Could you brief the history of the ITD?

A: The ITD was conceived as a joint initiative between the World Bank, the IMF and the OECD back in 2005, together with the backing of the United Nations. The EC and IDB then also signed up to the concept and became partners within it.

Its main purpose is to orchestrate an exchange on international taxation issues and to allow countries to benefit from each other's experience in this area. It has a simple agenda - the optimization of the taxation system and the enhancement of its application. It seeks to coordinate international taxation protocols to the benefit of both developed and developing countries.

To date, two global sessions of the ITD have been held. The first was in Rome in March 2005 and focused on the issue of Value-added Tax (VAT). The second session was held in October 2007 in Buenos Aires and addressed the issue of taxation policy and administration relating to small- and medium-sized enterprises. Officials from China's Ministry of Finance and the State Administration of Taxation attended both events.

Q: What, exactly, is the subject of this third ITD Global Conference and what significance does it have? What outcome do you hope to achieve here?

A: This new ITD session is focusing on "Financial Institutions and Instruments - Tax Challenges and Solutions" and is set to be the most significant international taxation event ever staged in China. It is certain to prove hugely influential on a global basis.

At the moment, the international economy is registering a number of positive indicators and a slow, hesitant recovery seems to have begun. Dealing with the ramifications of the global financial crisis, consolidating economic recovery and maintaining steady growth now pose common challenges for every government in the world.

Against this backdrop, delegations from international organizations and senior taxation officials are now gathering in Beijing. Together they will jointly explore the global and regional financial development trends, as well as their implications for taxation policies and levies, international cooperation and the coordination of financial supervision. All of these are of tremendous significance for four main reasons.

Firstly, the event will benefit from the implementation of the agreements reached at the G-20 Pittsburgh Summit. This will strengthen international taxation policy coordination, optimize global taxation, enhance the financial climate and accelerate global economic recovery.

Secondly, it will assist in improving taxation systems and policies in a number of different countries and enable taxation to play a more significant role in reducing financial risk, strengthening financial supervision and accelerating financial innovation and development.

Thirdly, it will accelerate the taxation dialogue, allowing for the exchange of successful experiences and promoting international understanding and collaboration.

Finally, it will successfully introduce China's taxation policies and investment climate, explain the country's world view, its position on key international taxation issues and exert its influence in the international taxation field.

The Chinese government attaches great importance on this event. As the key sponsor of the conference this year, the Ministry of Finance has spared no effort in its preparation for the event and has developed a close rapport with the secretariat of the ITD Global Conference.

We are openly willing to join hands with all parties concerned in a bid to ensure the success of the event. We are very serious about accelerating the successful development of international taxation policies and management.

Q: The world economy has been hit by the global financial crisis and many countries throughout the world have implemented stimulus packages to counter its effects. Many of these packages have included tax reduction measures. These efforts seem to have paid off. Could you identify which measures China has taken in adjusting its taxation policies?

A: Over the past year, in light of the economic downturn, the Chinese government has implemented a number of moves aimed at restructuring the macro economy, developing an active fiscal policy and a moderate monetary policy. It has introduced a raft of policies designed to boost domestic consumption and accelerate economic growth.

These active fiscal policies include expanding the government's public investment and boosting the construction of several key projects; promoting taxation reform and implementing structural tax reduction; increasing the income of poorly-paid groups and boosting consumer demand; optimizing the fiscal output structure; supporting technological innovation, promoting energy conservation, reducing emissions and overseeing economic structural adjustment and economic growth mode transformation.

During the implementation of these fiscal policies, the Chinese government has focused on the function of taxation as a means of adjusting the macro economy and has implemented a series of structural tax reduction policies.

Whilst continuing to implement the tax-reduction policies introduced last year, the country now implements consumption-type VAT. This will reduce the burden on businesses and encourage companies to increase their commitment to independent innovation and technology upgrades.

China has also introduced fee-to-tax reform on refined oil to lessen its impact on businesses and promote energy conservation. We have also abolished and ceased to levy some 100 tolls and fees. This is expected to result in a total saving of 550 billion yuan for businesses and individuals.

All of these efforts have played a major role in boosting the investment capacity in the business sector, enhancing consumer demand, driving growth and shaping the economic development mode.

In just 12 months, this macro-economic control, including the active fiscal policy, has been effectively implemented and generated positive results, contributing hugely to the economic recovery.

During the first three quarters of this year, our GDP grew by 7.7 percent year-on-year - despite a marked reduction in external demand. This growth rate shows the Chinese government's initiatives have proved both timely and effective.

Currently, the Chinese economy is showing signs of recovery, but its foundation is not yet stable. The global economic recovery is still vulnerable to a number of unpredictable factors.

We will continue giving the utmost priority to stabilizing the economy and implementing our active fiscal policy and moderately easy monetary policy. Only by fully implementing and optimizing these aspects of our strategy can we be sure of successfully emerging from the financial crisis.

As part of this process of accelerating economic growth, we will focus increasingly on economic structural adjustment, the cultivation of independent innovation, the need for energy conservation, the desirability of urban and rural coordination, as well as the need for a deeper economic reform and an improved standard of living across the country.

Q: Could you explain the development of China's taxation reform in recent years and its future direction?

A: In recent years, the Chinese government has implemented taxation reform based on the principle of simplifying the taxation system, a broader tax collection basis, lower tax rates and stricter tax collection.

These reform have included eliminating agricultural taxes, unifying taxes for domestic and foreign enterprises, fully implementing consumption type VAT, initiating fee-to-tax reform on refined oil, optimizing excise tax, revising individual income tax, perfecting farmland occupation tax and urban land usage tax, as well as reforming vessel and vehicle taxes.

As a result, the reform has built on the earlier overhaul of the taxation system in 1994. This has improved the taxation system in line with a socialist market economy, establishing a level playing field for all kinds of enterprises. It has also normalized the allocation relationships between commerce, government and individuals, and promote the stable and rapid economic development.

In the future, China will continue its taxation reform, whilst optimizing its taxation system in accordance with the demands of the prevailing outlook.

We will re-double efforts to implement consumption-based VAT, unify urban construction taxes and educational surcharge for domestic and foreign enterprises and individuals.

We will undertake increased research into individual income tax reform and the environmental protection taxation systems.

Q: Could you enlighten us with regard to China's recent foreign cooperation and exchange initiatives in the field of taxation?

A: Along with the growth of our comprehensive national strength and the deepening development of its globalization and regional economic integration, China has expanded its financial cooperation and exchange with a number of foreign countries. China has played an ever more important and constructive role in international financial affairs.

We have taken part in many international taxation talks and engaged in practical cooperation with many countries and international organizations.

These bilateral and multilateral cooperation and exchange events include the Sino-South Korea Taxation Policy Seminar, the annual taxation meeting of the ADB, the annual taxation meeting of the International Bureau of Fiscal Documents and, of course, and the ITD.

China also became a member of the Global Forum on Taxation in September 2009 and was subsequently elected as its vice chair.

Related readings:  A background history of the ITD  84 countries and regions converge on Beijing for international fiscal summit

Through all these activities, China has developed a deep understanding of the latest trends within the global taxation system, clearly demonstrated its position on a number of global taxation issues, accelerated its policy coordination with foreign countries, whilst enhancing its influence on the international taxation formulation and decision-making process.

The country has also actively expanded its economic cooperation with a number of major economic powers, neighboring countries and economic bodies, whilst accelerating policy coordination with foreign countries in the macro economy sphere and promoting pragmatic collaboration in the global financial arena.

The destiny of countries throughout the world has never been more closely joined, making it imperative for us to link arms and move forward together.

With regards to the future, China is committed to strengthening fiscal exchange and cooperation with foreign countries, creating an improved climate for more rapid domestic economic development and actively building a fairer and more rational international economic order.