Digital Taxation in China: Effects on Corporate Tax Risk Management and Compliance Strategies

Tax digitalization in China enhances efficiency and accuracy in tax administration through AI and technology. Significant advancements include online services, e-invoicing, and data integration, improving risk management. The government targets further reforms by 2025 to establish a robust intelligent taxation system.

Tax digitalization, also known as “digitalized tax administration” or “tax administration by data,” is gaining momentum in China. Enabled by digital technologies and artificial intelligence, Chinese tax authorities have significantly improved the efficiency and accuracy of tax administration. As a result, tax risks are now easier to identify, and tax audits have become more focused and targeted.

The Chinese tax bureau has made significant efforts to advance tax administration through digital upgrades and intelligent transformation. By utilizing modern information technology, the tax authorities have established platforms such as the electronic tax bureau, which enables online processing of tax registration, filing, and payments. Additionally, the promotion of electronic invoicing and the Golden Tax IV system has improved the efficiency and accuracy of tax administration.

This digital landscape allows tax authorities to integrate data from various sources, including invoices, banking information, business records, and customs data. Such integration facilitates more accurate identification of potential tax risks.

This article explores the impact of tax digitalization on businesses in China, emphasizing the evolving dynamics of tax risk management, particularly regarding data supervision.

At the opening ceremony of the 5th Belt and Road Initiative Tax Administration Cooperation Forum on September 24, 2024, Hu Jinglin, Commissioner of the State Taxation Administration (STA) of China, delivered a speech outlining the efforts of Chinese tax authorities to enhance tax administration and efficiency. He emphasized the importance of advancing tax governance through data, highlighting the STA’s commitment to leveraging data and algorithms for intelligent tax management.

Currently, a pilot program for fully digitalized electronic invoices (e-fapiao) has been expanded nationwide, alongside the launch of a unified electronic tax bureau. Additionally, a smart office platform for tax personnel is under development. These systems aim to provide intelligent services for taxpayers and enable tax officers to deliver differentiated and precise services based on dynamic credit risk assessments.

Furthermore, according to a document released by the General Office of the CPC Central Committee and General Office of the State Council in 2021, titled “Opinions on Further Deepening the Reform of Tax Collection and Administration,” China aims to achieve significant progress by 2025 in reforming its tax administration system. In particular, it aims to establish a robust and intelligent taxation framework and develop a first-class intelligent administrative application system, thereby improving tax law enforcement, service, and regulatory capabilities.

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