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| People in Charge from Legal Affairs Office of the State Council，Ministry of Finance and the State Administration of Taxation Answer Questions about the Interim Regulations of People’s Republic of China on Farmland Occupation Tax |
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| From：SAT |
Post time：2008/02/26 13:37:53 |
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The State Council has recently made an all-round revision on the Interim Regulations of People’s Republic of China on Farmland Occupation Tax (hereafter referred to as the current Regulations) released and implemented since 1987. Newly revised Interim Regulations of People’s Republic of China on Farmland Occupation Tax (hereafter referred to as Regulations) will be formally implemented on January 1, 2008. To facilitate everybody's understanding in the Regulations, people in charge from Legal Affairs Office of the State Council, Ministry of Finance, and the State Administration of Taxation accepted an interview.
Q: What is the background of this revision?
A: The current Regulations released 20 years ago have played a positive role in protecting the farm lands and promoting rational utilization of land resources. But with the development of economy, the current regulations have been unsuitable to new situation. The function of protecting farm land has also weakened day by day. For this reason, the Ministry of Finance and the State Administration of Taxation have worked out the Interim Regulations of People’s Republic of China on Farmland Occupation Tax (the draft amendment) (hereafter referred to as " draft ") and reported to the State Council for approval. The Legal Affairs Office of the State Council has solicited suggestions from related departments of the State Council and local governments. In August 2006, the State Council released the Announcement upon Issues Related to Strengthening Land Adjustment and Control (Guofa [2006] No.31), addressing to raise the standards of farmland occupation tax collection, strengthen the collection management and strictly control tax remission. To strictly protect farmland is also emphasized in the report of the 17th CPC National Congress. According to documents issued by the Central Party Committee and the State Council, Legal Affairs Office, the Ministry of Finance, the State Administration of Taxation have carried on in-depth studies, revisions and improvement of the draft. Upon the approval of the State Council, the draft is released in the form of State Council order.
Q: What parts are revised?
A: The Regulations have made revisions to the current regulations mainly in four aspects. First, Tax amount is raised. The lower and upper limits of current tax amounts are increased by 4 times. Specific tax amount will be determined by provinces, autonomous regions and municipalities directly under the central government according to their respective situations. Meanwhile, in order to lay special stress on protecting the basic farmlands, the Regulations stipulate that for entities taking up basic farmlands, the tax amount will be increased by 50% on the basis of applicable amount described above. Second, the taxation amounts of Chinese enterprises and foreign-funded enterprises are unified. Third, tax remission items are strictly defined. Tax remission for railways, airport runways, aprons and explosive magazines are cancelled. Fourth, collection management is strengthened. It has been made clear that farmland occupation tax collection management should conform to the Law of People’s Republic of China on Tax Collection Management.
Q: Why does the Regulations improve the farmland occupation tax standard by about 4 times?
A: The Regulations have increased the farmland occupancy tax amount by 4 times on the current basis. There are several reasons. First, the factor of price inflation for many years. According to the statistics from that State Statistics Bureau, resident's consumer price index has gone up by 2.2 times compared with 1987 in 2006. Second, the factor of land price inflation. According to the sample investigation on land prices in 6 provinces including Shanxi, Inner Mongolia, Jilin, Hunan, Hainan and Sichuan, the average land price in 2006 is more than 7 times of that in 1987. Except for some error factors, rising range of land prices is well-above that of commodity prices. The proportion of farmland occupation tax to land use cost is lower and lower. In 1987, the proportion of farmland occupation tax to land use cost was around 20%. According to the sample investigation, the proportion had dropped to under 4% in 2005. In 2006, the proportion of 40 key cities in the whole country was lower than 1%. Increasing the farmland occupation tax standard by 4 times can basically keep the level of real burden of taxation in 1987, and effectively facilitate the farmland occupation tax’s functions in protecting farmland and regulating unorderly land occupancy behaviors. Third, to carry out the strictly-controlled farmland protection system. Farmland will be less occupied and the current land in urban areas will be fully used through improving the farmland occupation tax standards. Fourth, to raise more funds for issues concerning agriculture, countryside and farmer. Central government No. 1 document in 2006 stipulates that the farmland occupation tax rate should be increased, and the newly-increased tax revenue should be used mainly for agriculture, countryside and farmers.
Q: Why do the Regulations include foreign-funded enterprises and foreign companies in the list of farmland occupation tax collection?
A: The Standing Committee of the National People's Congress passed in 1984 “The Standing Committee of the National People's Congress’s Decision to Authorize the State Council to Reform Industrial and Commercial Tax System and Release Relevant Interim Tax Collection Regulations (draft)”. The Decision stipulates that the interim tax collection drafts released by the State Council do not apply to the Chinese-foreign joint ventures and overseas-funded enterprises. Therefore, the current regulations stipulate: "The provision of this regulation does not apply to the foreign-funded enterprises." With the rapid development of the economy and urbanization, it has been more and more important to protect the farmlands. It will be opposite to the tax equity principle and affect the function of tax regulation if the foreign-funded companies and foreign companies are still exempted from farmland occupation tax. Therefore, according to authorization in “ The Standing Committee of the National People's Congress’s Decision of the Interim Regulations of Value-added Tax, Consumption Tax, Business tax Applicable for Foreign-funded Enterprises and Foreign Enterprises” issued by the Standing Committee of the National People's Congress in 1993, the provision in current regulations has been cancelled in the Regulations. Meanwhile, foreign-funded companies and foreign companies have been added into the category of taxpayers.
Q: Are there any changes in tax remission policies after the revision of the Regulations?
A: According to current regulations and relevant policies, for the land occupation of transportation infrastructure including railways, highways and channels, some are duty-free, some are on low-level of tax amount, and others are collected taxes according to their locations. In order to control tax remission and balance tax burden, the Regulations have cancelled the land occupation tax remission provisions for railways, airport runways, aprons and explosive magazines. Considering the balance between equal tax policies and national infrastructure construction, the Regulations stipulate that for the farmland occupied by railways, highways, airport runways, aprons, ports, and channels, tax standard is 2 Yuan per square meter. According to the real needs, after the consultations among Ministry of Finance, State Administration of Taxation and relevant departments of the State Council and upon the approval of the State Council, the above situations can be exempted from or hand in less farmland occupation tax.
Q: Why do the Regulations stipulate clearly that farmland occupation tax collection management should be carried on according to the Law of People’s Republic of China on the Administration of Tax Collection?
A: The current regulations are inconsistent with current laws, relevant provisions in the aspect of farmland occupation tax collection management. For example, the current regulations stipulate that it adds 5/1000 late payment penalties from the due date, which is inconsistent with the stipulation of adding 5/10000 late payment penalties per day in "The Law of People’s Republic of China on Tax Collection Management". The above-mentioned law is a general law about tax collection management, so the farmland occupation tax collection and management should conform to the law. In order to strengthen and unify tax collection management and sustain the consistency with relevant laws and administrative regulations, the Regulations have cancelled some stipulations which are inconsistent with "The Law of People’s Republic of China on Tax Collection Management" and other relevant laws and administrative regulations. The Regulations have clarified that farmland occupation tax collection management should be carried out according to "The Law of People’s Republic of China on Tax Collection Management" and the Regulations. |
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