Study Of The Improvement Of The Tax Agent System In China

The tax agency system is a set of rules and regulations that standardize the tax-related actions of tax agencies and agents when they accept taxpayers' entrust to transact business in income tax matters on behalf of taxpayers such as preparing tax self-declaration, calculating the balance and settling tax payments as well as doing self-examination, etc. It is indispensable to establish and improve the tax agent system in order to develop the socialist market economy, convert the functions of tax authorities and guarantee the smooth taxation process. From the taxpayers' point of view, a sound tax agency system helps to relieve them from the complicated tax matters, enable them to concentrate on business management and consequently reduce their business costs. From the perspective of tax authorities, the system can empower revenue staff to focus on their responsibilities of inspection and penalties on violation actions and thus improve the taxation efficiency. Tax Agency Industry has achieved great development in China. According to statistics as of the end of 2006, the number of registered tax agents amounts to 70,066, in China, among whom the practitioners are about 22,000 people. Nearly 100,000 people are engaged in tax agency work, and tax firms total up to about 3214. The tax agency industry is also beginning to play an important role in maintaining the country's economic order and enhancing the efficiency and quality in tax collection. According to the statistics from 21 regions regarding phasing in the corporate income tax calculation work in 2004, the number of companies audited by the tax firms comes up to 86,000, and a total increase of RMB 13.14 billion in NT allowance. According to a special topic questionnaire based on a sample of tax agencies from six provinces, regions and cities such as Zhejiang, Guangdong, Sichuan, Xinjiang, Inner Mongolia and Dalian, 60.91% of the taxpayers wished or requested for commission services from tax agencies with even greater latent demand. Currently there are more than 13.64 million various registered taxpayers in China (excluding those who pay personal income taxes), most of whom are small- and medium-sized-enterprises (SMEs). While demand market is huge in China, firms which are commissioning the tax agencies only account for about 9% of the nation's enterprises, far behind that of the US with 50% for enterprises and 100% for individuals, and that of Japan with 85% for enterprises.The fact of a vast demand market with a noticeable low percentage of tax agency entrustment indicates that many critical problems in the national tax agency system need to be tackled urgently. To name a few: relatively small proportion in taxation performance and low overall qualifications of the personnel; lack of independence in tax agencies; high risk in taxation practices; functional confusion and low efficiency in tax agent management, and so on. The existence of these problems has been greatly curbing the healthy development of the tax agency industry. To find out the sources of these problems, the author believes that the following reasons should be attributable: (1) Examinations and personnel management system is not quite reasonable; (2) Tax agents and the tax authorities have the mingled common interests; (3) There is a lack of effective internal quality control system; and (4) The function of guild self-discipline are not obvious. In addition, tax agency system is still in its infancy in China, unlike that in the developed countries which has developed for over a century and established a set of comparatively complete and effective regulations. Therefore, it is highly necessary for China to learn from those successful practices so as to improve the healthy development of the tax agency system in the following respects: to perfect the examination and management system for the tax agency personnel; to fully develop the independence of tax agencies; to establish the quality assessment system and compensation insurance system controlling risks of tax agencies; and to straighten out the tax agency management system and give full play to guild self-discipline functions, etc.Given the low quality of the personnel of tax agencies in the whole nation, this thesis initiated an all-round proposal of cooperative effort to improve this situation. This method goes through the following steps: lower the requirements for enrollment: enhance the evaluation of the practical skills; establish a corresponding incentive mechanism; implement a co-training approach by schools and reg(?)stered tax agents. In view of the high risk underlying this industry, this thesis recommends referring to the specific compulsory insurance clauses for traffic accidents obligations of motor vehicles, requiring the tax agencies' obligatory purchase of risk compensation policy. To put this recommendation in detail: The management center of Registered Tax Agents of the State Administration of Taxation teamed up with the insurance companies stipulate the minimum amount of risk compensation for the individual agency programs according to the risk ranges of different projects, based on a scrupulous and in-depth research. This suggestion is of relatively developmental significance to reduce the practicing risk range in the present tax agency industry. In an attempt to achieve an effective combination of theories and practices in this thesis, the author not only reviewed numerous literatures in both Chinese and English over time and across borders, but also employed a variety of research methods such as interview, field research, etc, to obtain the primary information regarding the problems lying in the national tax agency practices. All these efforts are made to ensure the feasibility and easy operation of the recommendation put forward by the author.