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Paying Taxes: Tax Payable and Compliance in ChinaTaxes are essential. Without them there would be no money to fund schools, hospitals, courts, roads,water, waste collection and other public services that help businesses to be more productive. Still, thereare good ways and bad ways to collect taxes.The Doing Business tax survey records the effective tax that a company must pay and the administrativecosts of doing so. Imagine a medium-size business, TaxpayerCo, that started operations last year. DoingBusiness asked accountants in 178 economies to review TaxpayerCo’s financial statements and astandard list of transactions the company completed during the year. Respondents were asked howmuch tax the business must pay and what the process is for doing so.The business starts from the same financial position in each country. All the taxes and contributions paidduring the second year of operation are recorded. Taxes and contributions are measured at all levels ofgovernment and include corporate income tax, turnover tax, all labor contributions paid by the company(including mandatory contributions paid to private pension or insurance funds), property tax, propertytransfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax and other small taxes(such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are alsorecorded.Three indicators are constructed:• Number of tax payments, which takes into account the method of payment or withholding, the frequencyof payment or withholding and the number of agencies involved for the standard case.• Time, which measures the hours per year necessary to prepare, file and pay the corporate income tax,value added or sales tax and labor taxes.• Total tax rate, which measures the amount of taxes payable by the company during the second year ofoperation. This amount, expressed as a percentage of commercial profit, is the sum of all the differenttaxes payable after accounting for various deductions and exemptions.Businesses care about what they get for their taxes and contributions, such as the quality ofinfrastructure and social services. Poor countries tend to use businesses as a collection point for taxes.Rich countries tend to have lower tax rates and less complex tax systems. And rich countries get morefrom their taxes. Simple, moderate taxes and fast, cheap administration mean less hassle forbusinesses—and also more revenue collected and better public services. More burdensome tax regimescreate an incentive to evade taxes.36
1. Historical data: Paying Taxes in ChinaPaying Taxes dataDoing Business2006Doing Business2007Doing Business2008Rank 173 168Time (hours) 872 872 872Total tax rate (% profit) 76.0 76.0 73.9Payments (number) 48 44 352. The following graph illustrates the Paying Taxes indicators in China over the past 3 years:484435767673.9872872872Payments (number)Time (hours)2005 2006 2007Total tax rate (% profit)37
Page 1 and 2: China
Page 3 and 4: © 2007 The International Bank for
Page 5: IntroductionDoing Business 2008 is
Page 8 and 9: 9. In China, a new property law put
Page 10 and 11: Summary of Indicators - ChinaStarti
Page 12 and 13: Starting a Business in China: Entry
Page 14 and 15: 3. Steps to Starting a Business in
Page 16 and 17: The following table shows Starting
Page 18 and 19: 1. Historical data: Dealing with Li
Page 20 and 21: 13. Review of construction drawings
Page 22 and 23: The following table shows Dealing w
Page 24 and 25: 1. Historical data: Employing Worke
Page 26 and 27: The following table shows Employing
Page 28 and 29: 1. Historical data: Registering Pro
Page 30 and 31: 4. Benchmarking Registering Propert
Page 32 and 33: Getting Credit in China: Legal Righ
Page 34 and 35: 3. Benchmarking Getting Credit Regu
Page 36 and 37: Protecting Investors in ChinaOffici
Page 38 and 39: 3. Benchmarking Protecting Investor
Page 42 and 43: 3. Benchmarking Paying Taxes Regula
Page 44 and 45: Trading Across Borders: Importing a
Page 46 and 47: 3. Benchmarking Trading Across Bord
Page 48 and 49: Enforcing Contracts: Court Efficien
Page 50 and 51: 3. Benchmarking Enforcing Contracts
Page 52 and 53: Closing Business in China: Bankrupt
Page 54 and 55: 3. Benchmarking Closing Business Re
Page 56 and 57: APPENDICESStarting a Business in Ch
Page 58 and 59: - Appointment documents and identif
Page 60 and 61: Cost to complete:Comment:no chargeA
Page 62 and 63: 14 *Receive review of building draw
Page 64 and 65: Procedure1Request and obtain approv
Page 66 and 67: Comment:Procedure6The Shanghai Hous
Page 68 and 69: Procedure14Receive review of buildi
Page 70 and 71: Comment:No time limits apply for in
Page 72 and 73: 建建建建建建建建建
Page 74 and 75: Employing Workers in ChinaEmploying
Page 76 and 77: Registering Property in ChinaThis t
Page 78 and 79: Procedure3(v) Photocopy of the iden
Page 80 and 81: Protecting Investors in ChinaThe ta
Page 82 and 83: Paying Taxes in ChinaThe table belo
Page 84 and 85: Trading Across Borders in ChinaThes

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