2023 Work Report of Shanghai Municipal Tax Service of the State Taxation Administration

　　I. Tax Revenue and Highlights

　　Shanghai accomplished the 2023 goals for tax revenue at all levels.

　　2023 Tax Revenue of Shanghai  

　　Note: The tax revenue levied by tax authorities excludes the import tax levied by customs.

　　The highlights of the full-year tax revenue (excluding import tax collected by customs) levied by tax authorities: Tax revenue increased steadily, and the figure at the local level exceeded the target. The tax revenue collected by tax authorities grew by 32.07 billion yuan from the prior year, and the local part went up by 60.99 billion yuan, surpassing the target. Turnover tax saw a relatively high increase, while income tax edged down. Turnover tax amounted to 680.07 billion yuan, a year-on-year growth of 17.9%. Value-added tax (VAT) rose by 28.9% from the previous year as the revenue base dropped due to large-scale credit refunds in 2023. Income tax fell by 6.7% year on year to 680.15 billion yuan, with corporate income tax down 10.3% from the prior year. The tax revenue from the secondary sector slowed down and that from the tertiary sector grew steadily. The secondary-sector tax revenue edged up by 3.1% year on year to 355.67 billion yuan, with that from the industry down 2.2% from the prior year. The tertiary-sector tax revenue amounted to 1.22339 trillion yuan, a 1.2% year-on-year increase. The tax revenue from rental, business and other services rose by 9.7%.

　　II. Social Insurance Premium and Non-tax Revenue

　　Shanghai carried out a reform on the improvement of the social insurance premium collection and payment process. As one of the first regions where pilot sectors for replacement of business tax with VAT in China were expanded, Shanghai saw 820,000 employers and 400,000 flexible employees file a social insurance premium declaration with tax authorities starting from December 1, 2023. It tested a new management service model for social insurance premiums paid by natural persons. The Shanghai Municipal Tax Service teamed up with the Shanghai Civil Affairs Bureau, the Shanghai Municipal Human Resources and Social Security Bureau and other departments to facilitate the “one-stop handling” of social insurance premium business of natural persons in communities, in a bid to solve the problem of multi-department decentralized management. Non-tax revenue was standardized. Efforts were made to further improve relevant tax collection and management process and strengthen the management of declaration of revenue from transfer of land-use rights.

　　III. Tax Support Policies

　　The municipal tax authorities added tax and fee policies, and participated in the development of four tax policies that were included into the city’s action plan of "boosting confidence, expanding demand, stabilizing growth and promoting development". It enhanced the effectiveness of policies and upgraded the mechanism of introducing tax preferential policies for specific taxpayers. It established and implemented the "service package" system for key enterprises, and accurately guided enterprises to make full use of various preferential policies. The authorities added a new "all-in-one" intelligent enjoyment system, and monitored and solved the difficulties in the enjoyment of tax preferential policies.

　　IV. Serving Construction of “Five Centers”

　　The Shanghai Municipal Tax Service actively implemented the policy of extra tax reductions on the research and development expenses of companies to support the development of key industries such as integrated circuits, biomedicine, and artificial intelligence. It worked with the Science and Technology Commission of Shanghai Municipality to formulate the Operation Guidelines for Registration of Basic Research Contracts on Enterprise Investment in Shanghai (Trial), the first such document in China, and implement it on a trial basis. It introduced three new policies for VAT deductions for companies in integrated circuits, machine tool, and advanced manufacturing sectors to boost technological innovation and industrial upgrading. The tax authorities facilitated export tax rebates and required no application for credit insurance compensation deemed as tax refunds on foreign exchange collection, effectively reducing the tax burden of enterprises. The service was promoted by the municipal government. It optimized the management of export tax refund (exemption) filing documents, and explored the provision of "cloud sharing" digital services for filing documents for exporters, in a bid to achieve cloud processing of "reporting, storage, inspection and verification" of various documents. Continuous efforts were made to expand the effect of the implementation of the departure tax refund policy. It took the lead in introducing the centralized method of “instant refund upon purchase” for departure tax refunds, improving the shopping experience of overseas tourists.

　　V. Supporting Shanghai in Building Pudong into Leading Area

　　It released a package of preferential policies concerning important companies, high-calibre talents and the like, drove entities in pivotal domains to make breakthroughs in innovation, and accelerated the pace to attract major industries and high-calibre talents to gather together. Shanghai proposed a tax system innovation scheme according to strict international economic and trade rules, sought support from the State Taxation Administration and supported China in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement. In terms of the innovation in tax collection and management services, it released 10 new tax service measures for building Pudong into a leading area for socialist modernization construction based on the "17+10+9" progressive tax collection and management service measures in Lingang Special Area. Additionally, innovative measures were unveiled to improve the international tax fine service level, promoting the high-standard opening-up in Pudong.

　　VI. Tax Integration in Yangtze River Delta

　　Based on the "16+10+9" tax measures for the integrated development of the Yangtze River Delta, the Shanghai municipal tax authorities collaborated with other tax departments in Shanghai, Jiangsu, Zhejiang, Anhui and Ningbo to introduce 9 new measures, aiming to strengthen the endogenous impetus for integrated regional development. It held a symposium on tax support for the integrated development of the Yangtze River Delta. Together with its counterparts in the aforesaid provinces and cities, the Shanghai Municipal Tax Service summarized the results at the juncture of the fifth anniversary of the region’s integrated development as a national strategy. Efforts were made to promote the use of fully digital electronic invoices in the whole Yangtze River Delta, and explore cross-provincial collaboration with tax organs in Zhejiang, Ningbo, Anhui and other places to improve the overall effectiveness of tax-related risk prevention and control in the Yangtze River Delta region.

　　VII. Individual Income Tax Reform

　　The Shanghai Municipal Tax Service handled affairs related to the annual individual income tax settlement. The normal annual settlement management system was improved continuously. Under the reservation service, taxpayers were guided to handle tax affairs during off-peak hours. The tax refund review mechanism was optimized to strictly prevent the associated risk. It carried out policy publicity and guidance, gave reminders to taxpayers on declaration, and strengthened the monitoring of declaration data. Post-event spot checks were prudently carried out, including "key spot checks + random spot checks". As required by the SAT, the Shanghai Municipal Tax Service disclosed typical cases and released regulation signals.

　　VIII. Improving Tax and Business Environment

　　2023 marks the 10th consecutive year of the launch of the Spring Breeze Action to Facilitate Citizens' Handling of Tax Affairs. A total of 109 measures were introduced in 5 batches. The municipal tax organ integrated resources of handling tax and fee matters and optimized the tax service window to set up the “one-stop window” model. The reservation service at the “tax service hall” was promoted. More than 1.18 million reservations were made throughout the year. It introduced the national unified collection and payment interactive service, achieving accurate push, intelligent interaction, handling and inquiring coordination, and full-process interaction. Shanghai Municipal Tax Service launched the first English intelligent voice consultation service in the national tax system to provide high-quality, convenient and efficient tax and fee consultation services for cross-border taxpayers. More than 70 social co-governance points were set up in the city, creating a “15-minute tax service circle”. Together with the Shanghai Municipal Bureau of Planning and Natural Resources, the municipal tax authorities carried out a reform of joint real estate registration services, which ensures the issuance of real estate ownership certificates upon completion of land delivery procedures without any materials, continuously facilitating and standardizing tax handling. It improved the tax dispute resolution mechanism, under which it set up standardized tax dispute mediation rooms and windows of reporting failure to handle tax matters in 26 tax service halls in Shanghai. The tax authorities further promoted the work of "positive and negative feedback", forming a closed loop covering the whole process from "evaluation, feedback, rectification and supervision", as an attempt to solve the pain points in tax and fee payment. Qingpu District Tax Service’s Intelligent Taxpayer Service Hall and Jiading District Tax Service’s tax assistance were included as outstanding cases of improvement of the business environment in Shanghai in 2023.

　　IX. Deepening Tax Collection and Management Reform

　　It followed the Opinions on Further Deepening the Reform of Tax Collection and Administration released by the general offices of the CPC Central Committee and the State Council, with new breakthroughs made in smart taxation and the system characterized by "precise law enforcement, fine services, precise regulation, and sincere co-governance". Five practices have been replicated and promoted by the SAT. Multi-cloud collaborative intelligent data platform, a significant result of tax service development in Shanghai, won the first prize of Shanghai Science and Technology Awards. In terms of “precise law enforcement”, the tax authorities improved the operational norms of "impunity for the first violation", constantly enhancing the standardization, convenience and precision of law enforcement. As far as “fine services”, it created a new tax service location management model that is "audible, visible and touchable", and rolled out an innovative "one-click" tax preferential policy experience service. As for “precise regulation”, risk control was conducted on all tax types, in whole lifecycle, and by grade, exploration was made to establish a "one-picture" management platform, and some scenarios were digitalized and visualized. In view of “sincere co-governance”, it released the Measures for Guarantee of Tax Collection of Shanghai on January 12, 2023, consolidating legal support for strengthening tax collection services.

　　X. Digital Transformation of Tax Matters

　　A pilot scheme about the issuance of digital e-invoices was implemented in an accelerated way. The Shanghai Municipal Tax Service increased the number of pilot companies for Natural System Connection, allowing them to accelerate financial digital transformation. It ranked first in terms of the number of companies connected in China. It took the lead in promoting four innovative scenarios, namely the non-resident cross-border tax service, the intelligent service for new businesses, the simple confirmed declaration, and the on-demand invoicing for those with good credit at the electronic tax bureau, to streamline the formalities for taxpayers. Riding on the electronic tax bureau, the municipal tax authorities optimized the enterprise side and tax side of the flagship store of Yiqitongxing (壹企同行), providing large enterprises with 31 high-frequency matters in 4 categories, including tax and fee matter handling, direct demand, and intelligent consulting. Tax payment channels were increased. The cooperation with the Industrial and Commercial Bank of China and the People's Bank of China provides a new approach to promote the use of digital RMB to pay social insurance premiums for urban and rural residents and flexible employees. With blockchain technology, it facilitated the online "one-stop" tax payment for non-resident enterprises. Via Government Online-Office Shanghai, it completed the connection with Suishenban Enterprise Cloud. An innovative “tax payment service” area was set up, supporting the handling of 22 high-frequency matters on phones. It optimized the “one thing” service for personal equity changes and tax and fee payment.

　　XI. Tax Governance of Large Enterprises

　　The Shanghai Municipal Tax Service expedited the improvement of the new pattern of tax services and management of large enterprises in the city. Priorities were given to the tax source monitoring on major groups. A weeklong industry-wide activity was normalized in the key groups, with insights into the basic situation of all these groups in Shanghai. It improved the standardization of industry research offices and established an industry policy library and database. Tax services for large enterprises were optimized. The tax organ worked out and actively made public the administrative measures for advance tax rulings to enhance the certainty of the application of tax laws to taxpayers. Online exclusive communication channels were opened for large enterprises to collect, deal with and give feedback to various tax demands of large enterprises. It prevented and controlled tax-related risks from large enterprises, and implemented the "centralized analysis, territorial response, and centralized review" risk management model for large enterprises, in a bid to enhance the effectiveness and pertinency of risk management. It issued risk management proposals and group compliance reports for some key groups, guiding them to prevent and eliminate tax risks in a timely manner.

　　XII. Strict Crack down on Tax Offenses

　　It strictly cracked down on tax violations and cast eyes on companies with high risks of export tax frauds. The authorities investigated 60 companies that fraudulently obtained export tax refunds and uncovered two typical cases. The police, with which it closed cooperated, smashed 21 gangs for making false invoices and arrested 209 suspects, effectively maintaining the market economic order.

　　XIII. Economic Analysis of Taxation

　　Efforts were stepped up to conduct economic analysis of taxation, with which Shanghai Municipal Tax Service continuously offered advice for the government. The influence of indices was expanded. The Shanghai tax and economic development index and value-added tax invoicing sales were included in the economic operation monitoring big data high-frequency index system by the Shanghai Municipal Development and Reform Commission. It explored the establishment of the "leading area tax and economic development index" for Pudong New Area. It established a backbone tax and economic analysis team and set up a taxation team to improve the level of analysis.

　　XIV. International Tax Governance

　　The Shanghai Municipal Tax Service expanded international tax services. It offered cross-border investment services by category and launched the sub-brand called Shuilutong (literally tax connect). The tax authorities pushed ahead with the advance pricing arrangement and mutual negotiation, hoping to improve tax certainty for cross-border operations and complex transactions. It optimized the informatization of non-resident tax matters, and supported taxpayers in piloting the new business of overseas tax payment through online declaration and other means. Endeavour was made to standardize the follow-up management of tax treaty benefits, and improve the follow-up management risk monitoring system for non-resident tax sources. It strengthened overseas tax services for resident enterprises, and continued to improve the cross-border tax source service management system for resident enterprises.

　　XV. Law-based Tax Administration

　　The law-based administrative mechanism was continuously improved. Non-mandatory law enforcement methods were adopted to handle six tax matters, which was selected as a municipal project of "rule of law for people" in Shanghai. The Shanghai Municipal Tax Service formulate guidelines on "impunity for the first violation" for administrative penalties. It strengthened the "three systems" of administrative law enforcement, optimized and upgraded three guidelines, and released two audio-visual demonstration films. The notification commitment system was applied to 12 tax certification items in two batches. It implemented the list-based management for tax administrative licensing matters. A legal service brand involving public lawyers was built, enabling the direct connection between legal service needs and the work of public lawyers.

　　XVI. Financial Management

　　Control over general expenditures for departments was tightened and financial resources were concentrated to prioritize tax reform and basic operation at the grassroots level. The municipal tax authorities optimized and improved the financial management system, released training fee management measures, determined the scope and standards of expenditure, and improved the provisions on review and approval of expenditure. It published interim administrative measures for public property warehouses, revised the administrative measures for company cars, and further standardized the use of public assets and company cars. With “intelligent tax procurement” service, it dynamically monitored all budget units and the whole process of procurement projects in the system. The total income and expenditure amounted to 5.6889806 billion yuan in 2023. The annual income stood at 5.5337112 billion yuan, with carryover and balance of 155.2693 million yuan at the beginning of 2023. The annual expenditure was 5.4472008 billion yuan, with year-end carryover and balance of 241.7798 million yuan.