Taxation is related to the distribution of wealth and the livelihood of the nation, so the basic system of taxation is a matter of legislative reserve. For some time in the past, due to insufficient tax practice, the legislature authorized the State Council to formulate all kinds of temporary regulations on taxation in the form of enabling legislation. With the continuous improvement of China's legal system, strengthening the tax legislation has become the right thing to do. The Opinions on Further Deepening the Reform of Tax Collection and Administration issued by the General Office of the CPC Central Committee and the General Office of the State Council also explicitly require "the full implementation of the principle of tax legislation, and accelerate the promotion of the existing temporary regulations on taxation into law." This article takes stock of the various tax legislation activities in 2022 and looks forward to the tax legislation in 2023.

Ⅰ.Focus on Tax Legislation Dynamics in 2022

Since the 18th National Congress of the CPC, the State has been strengthening the principle of tax legislation, which is mainly manifested in the upgrading of temporary regulations into laws. For newly-opened taxes, the legislature authorizes pilot projects to ensure that the opening of the tax and the basic content of the tax are determined by the law, in compliance with the provisions of the Legislative Law.2022, although tax legislative activities have been delayed due to the impact of the epidemic, they are still progressing steadily in general.

(I) Pilot real estate tax has been put on hold 

As early as 2015, real estate tax has been included in the legislative planning of the 12th NPC Standing Committee, formally delineating the timetable for real estate tax legislation.On March 13, 2021, the "14th Five-Year Plan" and the 2035 Vision and Goals Outline explicitly included "advancing real estate tax legislation" as a work priority. "In October 2021, the Thirty-first Meeting of the Standing Committee of the Thirteenth National People's Congress decided to authorize the State Council to carry out pilot work on real estate tax reform in some areas, so as to actively and steadily push forward the legislation and reform of real estate tax, guide the reasonable consumption of housing and the economical and intensive use of land resources, and promote the stable and healthy development of the real estate market. However, into 2022, the person in charge clearly said: "this year does not have the conditions to expand the pilot city of real estate tax reform", the pilot activities of real estate tax delayed.October 27, the Ministry of Finance issued a document "on the support of shenzhen to explore the innovation of the fiscal policy system and the implementation of the management system of the opinions" pointed out: support shenzhen Early and pilot in the national tax reform. As an intended city for the symposium on the pilot work of real estate tax held by the Ministry of Finance, Shenzhen may become a pilot city for real estate tax in the following.

(II) Stamp Duty Law effective from July 1, 2022

On June 10, 2021, the Stamp Duty Law was passed at the 29th meeting of the Standing Committee of the 13th National People's Congress, and on July 1, 2022, the Stamp Duty Law came into effect, making it the 13th law in the field of taxation in China, and the 12th of the 18 existing taxes to be regulated by law. In accordance with the principle of "leveling the tax system", the legislation elevated the Provisional Regulations on Stamp Duty (hereinafter referred to as the Provisional Regulations) to the status of a law, and at the same time partially adjusted and improved the stamp duty system in the light of the economic and social development and the actual practice of levy and management.  Announcement of the Ministry of Finance and the State Administration of Taxation on the Convergence of Preferential Policies after the Implementation of the Stamp Duty Law (Announcement of the Ministry of Finance and the State Administration of Taxation No. 23 of 2022) was issued to clarify preferential policies on stamp duty. The State Administration of Taxation ("SAT") issued the Announcement of the State Administration of Taxation on Matters Relating to the Implementation of the Stamp Duty Law of the People's Republic of China (Announcement No. 14 of the State Administration of Taxation of the People's Republic of China of 2022), which clarified some of the issues relating to the levy of stamp duty.

(III) Legislative Program of the State Council in 2022: Draft Customs Tariff Law, Draft Value-added Tax Law and Draft Consumption Tax Law to be submitted for consideration. 

On July 5, 2022, the General Office of the State Council issued the Circular on the Legislative Work Plan of the State Council for the Year 2022, requesting scientific and reasonable arrangement of legislative projects, focusing on comprehensively deepening reform and opening up and promoting high-quality economic development, and, in terms of tax legislation, submitting the draft Customs Tariff Law and the draft Value-added Tax (VAT) Law to the Standing Committee of the National People's Congress (NPC) for deliberation and preparing to submit the draft Consumption Tax Law to the Standing Committee of the NPC for deliberation. So far, the draft value-added tax law has been submitted to the NPC Standing Committee for consideration.

(IV) The Standing Committee of the National People's Congress (NPC) deliberated on the (Draft) Law on Value-Added Tax for the first time

In 2019, the Ministry of Finance ("MOF") and the State Administration of Taxation ("SAT") drafted the "Value-added Tax Law of the People's Republic of China (Draft)" ("Draft VAT Law") in connection with the public consultation on the "Value-added Tax Law (Draft VAT Law)" ("Draft VAT Law") (hereinafter referred to as "Draft VAT Law"). The Ministry of Justice and other relevant ministries and commissions subsequently formed the Draft Value-added Tax Law (hereinafter referred to as the "Draft"), which was submitted to the Standing Committee of the 13th National People's Congress ("NPC") in December 2022 for deliberation after being discussed and passed by the Standing Committee of the State Council. After its first consideration and adoption by the Standing Committee of the NPC, a public consultation on the Draft was conducted for a period of 30 days. The VAT legislation is generally based on the idea of tax leveling, taking the Provisional Regulations on Value-added Tax (VAT) as the basis, and, while keeping the existing tax framework and tax burden level basically unchanged, combining some of the tax policies in recent years, forming a unified legal framework of VAT, which is a solid step forward for the implementation of the "principle of taxation and lawfulness". A solid step has been taken to implement the "principle of statutory taxation".

(V) E-cigarettes are included in the scope of consumption tax, ushering in changes in consumption tax. 

Consumption tax legislation has been one of the legislative activities that the State Council has been focusing on, and was also included in the State Council's legislative work plan for 2022, but was not implemented.In October 2022, the Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation (SAT) issued the "Announcement of the Ministry of Finance, Customs General Administration of Taxation, and the State Administration of Taxation on the Collection of Consumption Taxes on Electronic Cigarettes" (Ministry of Finance, Customs General Administration of Taxation, and the State Administration of Taxation Announcement No. 33 of 2022), which includes electronic cigarettes in the taxable scope of consumption tax, and implement the ad valorem rate method to calculate the tax. The tax rate for the production (import) segment is 36% and the tax rate for the wholesale segment is 11%. The State Administration of Taxation (SAT) issued the Announcement of the State Administration of Taxation on Matters Relating to the Collection and Administration of Consumption Tax on Electronic Cigarettes (SAT Announcement No. 22 of 2022) to clarify the collection and administration issues. The current consumption tax legislation should be considered and incorporated.

Ⅱ.Tax legislation outlook for 2023

(I) The draft VAT law is expected to be considered as soon as possible, and the tax legislation work will be further advanced

1. Background of Value-added Tax Legislation

Value-added tax (VAT) is the largest tax in China, with a high proportion of tax revenue, a wide range of taxation, and a large impact on China's economy and society. before 2012, China used business tax as the main tax, but due to the non-deductible nature of business tax, there are difficulties in the collection and management of business tax and it is prone to serious double taxation, which increases the burden on enterprises. Therefore, since 2012, China has started to pilot the "business tax" reform, adopting a step-by-step implementation approach, continuously expanding the taxable items of VAT, and fully completed the business tax pilot program in 2016, initially establishing a modern VAT system. 2017, the State Council amended the Provisional Regulations on Value-added Tax (VAT Provisional Regulations) to provide for the "business tax" and the "VAT Provisional Regulations". In 2017, the State Council amended the Interim Regulations on Value-Added Tax to establish the results of the "camp to increase" reform at the legislative level.

The nature of the Provisional Regulations is in the nature of enabling legislation, and the source of its authorization is the decision of the 7th Meeting of the Standing Committee of the Sixth National People's Congress (NPC) on September 18, 1984, based on the proposal of the State Council: "To authorize the State Council to draw up the relevant tax regulations in the course of implementing the conversion of profits into taxes for state enterprises and reforming the industrial and commercial tax system, to issue them in draft form for trial implementation, and then, based on the trial implementation and experience to be revise them in the light of trial implementation and experience, and submit them to the Standing Committee of the National People's Congress for consideration." When authorizing legislation in 1984, the Standing Committee of the National People's Congress did not limit the period of authorization, so the relevant temporary regulations have been continued until now. However, the authorized legislation is not a law after all, and after the revision of the Legislation Law in 2015, the authorized legislation has the characteristics of temporary, short-term and pilot, and the tax legislative activities have become a priority.

2. the impact of the revision of the Legislation Law on VAT legislation

The revision of the Legislation Law in 2015, first of all, clarifies the scope of tax legislation retained, that is, the old Legislation Law only stipulates that only "the basic economic system as well as the basic systems of finance, taxation, customs, finance and foreign trade" should be enacted in the field of taxation, of which "the basic system of taxation" is not mentioned in detail. Article 8(6) of the 2015 Legislative Law clearly stipulates that only laws shall be enacted on the "basic tax system, such as the establishment of tax types, the determination of tax rates and the administration of tax collection". And according to Article 10, "The authorization decision shall specify the purpose, matters, scope, and duration of the authorization, as well as the principles to be followed by the authorized organ in implementing the authorization decision." "The duration of the authorization shall not exceed five years, unless otherwise provided for in the authorization decision." The duration of the authorization to legislate is clearly defined as five years.

The 2015 Law on Legislation first establishes a deadline for the authorization of legislation, which cannot retroactively affect the effectiveness of the Provisional Regulations on VAT, but puts pressure on the State Council to upgrade it to law as soon as possible. Second, the VAT rate is now authorized by the State Council to be adjusted by the Ministry of Finance and the General Administration of Taxation, but the rate belongs to the basic system of taxation retained by the legislation, and it is not appropriate to change it easily after the legislation has been enacted or to authorize the State Council to make adjustments easily.2022 On December 20, 2022, the "Legislation Law (Second Consideration of the Draft Amendments)" ("draft amendment ") was published, although the draft amendment did not revise the Article, and legislative activities need to maintain consistent prudence. At the same time, the draft amendment requires that after the publication of laws and regulations, the description of the draft should be made public in a timely manner, and the legislative information should be released through multiple channels, which is of great significance for improving the legislative procedures and strengthening the legislative publicity. In the process of promoting the existing provisional tax regulations to be upgraded to laws, the public disclosure of the draft tax law and its description has a clear scope and timeframe requirements.

3. Value-added tax law may be introduced this year

In 2015, the Legal Affairs Committee of the Standing Committee of the National People's Congress (NPC) took the lead in drafting the "Implementation Opinions on Implementing the Principle of Taxation Statute", which further clarified that the introduction of a new tax should be formulated through the National People's Congress (NPC) and its Standing Committee to formulate the corresponding tax law.2021, the "Opinions on Further Deepening the Reform of Taxation Levies and Administration" required that the "principle of taxation statute is comprehensively implemented to expedite the promotion of raising the existing tax provisional regulations into laws." The VAT system has been stabilized after the change of "camping to increase" and has the conditions to be upgraded into law. However, legislative activities are complex and cumbersome. According to the provisions of the Legislative Law, if the Standing Committee of the National People's Congress is to enact legislation, the draft should be considered by the Standing Committee for three times before it is put to a vote, the so-called "third reading". At the same time, it is necessary to listen to the opinions of various parties, taking the Law on Environmental Protection Tax as an example, it took more than a year from public consultation (June 10, 2015) to the formation of the draft law submitted for deliberation (September 02, 2016). The Stamp Duty Law of the People's Republic of China (Draft for Public Comments) took approximately three years from public consultation (November 1, 2018) to its official implementation on June 10, 2021.

According to Article 37 of the Legislative Law, "A bill of law included in the agenda of a meeting of the Standing Committee shall, after the meeting of the Standing Committee, be published to the public for comments, together with the draft law and the explanations for drafting and revising the draft law, unless the meeting of the Chairman of the Standing Committee decides not to publish it. The period of time for publicizing the draft law to the public for comments is generally not less than thirty days. The public shall be informed of the consultation." Now this draft VAT law is in the stage of soliciting opinions after the initial deliberation. As VAT is more complex and specialized, its second and third deliberations may be completed by the end of this year or next year.

(II) The legislative process of real estate tax is expected to accelerate in 2023

On October 23, 2021, the Standing Committee of the National People's Congress ("NPC") made the "Decision of the Standing Committee of the National People's Congress on Authorizing the State Council to Carry Out Pilot Work on Real Estate Tax Reform in Some Areas," authorizing the State Council to carry out a pilot project on real estate tax for a period of five years.In 2022, the pilot project on real estate tax did not move forward as the conditions were not yet met.In 2023, with the recovery of the economy, the reform of real estate pilots will likely be back on track. Currently, the legislative process of the real estate tax law is still at the stage of improving the draft law and justifying important issues, and the introduction of the real estate tax law is subject to further wait and see.

(III) Attention to the revision of the Tax Collection and Administration Law

In accordance with China's current tax legislation system, the Tax Collection and Administration Law provides for the general content of tax collection and administration, including tax registration, tax declaration, tax payment, tax inspection, etc., which involves the specific implementation of tax policies and administrative procedures for tax collection. Therefore, although the Tax Collection and Administration Law is nominally a procedural law, it assumes part of the function of the general rules of the tax law in the absence of the general rules of the tax law, and its significance is self-evident.When the Tax Collection and Administration Law was revised in 2015, the contents of its consultation draft were more radical, with major adjustments made to the current tax collection and administration system, and more prominence was given to the collection and administration law as China's general law of taxation and the general rules of the tax law However, the actual revision did not adopt the contents of the consultation draft, but made minor adjustments on the basis of the original Tax Collection and Administration Law.

At present, China's tax legislation has the problem of focusing on the leveling of the tax system and insufficient construction of the tax law system. Firstly, as a special field of state administration, the Tax Collection and Administration Law is not sufficiently articulated with the Administrative Penalty Law, Administrative Compulsory Law and other administrative general laws, resulting in some disputes in practice; secondly, the 13 existing tax laws in our country which have been upgraded into laws lack a unified and coordinated system to guide each other, resulting in the application of the tax laws being complicated and the phenomenon of duplicated taxation happening from time to time; thirdly, the tax laws in the existing tax law system in our country are not sufficiently articulated, and the system of tax laws is not sufficiently articulated. Thirdly, the General Principles of Tax Law are absent in the current tax law system of China, and there is a lack of provisions on general principles, principles and basic systems of tax law, with some of the functions being taken over by the Tax Collection and Administration Law. Therefore, in order to strengthen the implementation of the principle of tax law and realize the systematization of tax legislation, it is necessary and feasible to improve the Tax Collection and Administration Law.

In fact, until 2019, the revision of the Tax Collection and Administration Law is still included in the legislative work plan of the State Council, but the relevant details have not been released to the public, and although it is no longer included in the legislative work plan of the State Council after 2020, the revision of the collection and administration law is still worthy of attention with the completion of the legislation of the separate tax law.