Editor’s Note

On August 31, 2026, the Executive Meeting of the State Council deliberated and approved in principle the Draft Revision of the Law of the People’s Republic of China on the Administration of Tax Collection, and resolved to submit the Draft to the Standing Committee of the National People’s Congress (NPC Standing Committee) for review. From the release of the draft for public consultation in March 2025, through extensive debates and proposals from all sectors of society, to the State Council’s decision marked by the wording “approved in principle”, what lies behind this formulation? Whether the previously controversial clauses have been adopted, and what stages will follow? This article interprets the logic and trajectory behind this legislative process.

01 Release of the Draft for Public Consultation and Intensive Public Feedback

On March 28, 2025, the State Administration of Taxation (SAT) issued the Law of the People’s Republic of China on the Administration of Tax Collection (Draft for Public Consultation) together with supporting notes, and publicly solicited opinions from society. This marks another major revision 24 years after the comprehensive overhaul in 2001. The current Law on the Administration of Tax Collection was enacted and promulgated by the Standing Committee of the Seventh NPC in September 1992 and entered into force on January 1, 1993. It has undergone four subsequent amendments in 1995, 2001, 2013 and 2015. Among these, only the 2001 revision was comprehensive, which significantly embedded the principles of law-based tax administration and protection of taxpayers’ rights and interests; the other three were minor tweaks. While the 2025 revised draft is less innovative than the 2015 draft, it still introduces many material changes.

In respect of taxpayer identification numbers and tax registration, the Unified Social Credit Code and resident identity number will serve as tax identifiers for enterprises and natural persons respectively. Enterprises will automatically obtain their taxpayer identification number upon incorporation, with the business license functioning directly as the tax registration certificate, eliminating separate tax registration procedures. On cross-agency sharing of tax-related information, a statutory mechanism for the provision and sharing of tax information across government departments will be established. Tax authorities will be granted statutory authority to access tax information from public security, financial regulatory, customs and other authorities, which in turn bear statutory obligations to cooperate. Natural persons will also be brought within the scope of parties obligated to report tax information. In anti-avoidance and tax enforcement, anti-avoidance tax adjustments will expand from related-party transactions to non-related-party transactions and from enterprises to individuals. Tax authorities may enforce collection against taxpayer funds held in third-party payment platforms including Alipay and WeChat Pay. The doctrine of piercing the corporate veil will be introduced, empowering tax authorities to directly recover tax debts from shareholders. Procedurally, the pre-payment requirement for administrative reconsideration is repealed; a new regime is established: reconsideration first, tax payment second, then litigation. The term “tax evasion” replaces “tax dodging” to align with the Criminal Law. In addition, legal basis is provided for electronic tax invoices and other electronic vouchers, and tax authorities are explicitly authorised to use big data analytics to assess tax risks.

Nevertheless, multiple provisions in the draft triggered heated debate across sectors. First, the renaming from “tax dodging” to “tax evasion” fails to reflect the principle of consistency between subjective and objective elements. While aligning with the Criminal Law and judicial interpretations issued by the Supreme People’s Court and Supreme People’s Procuratorate, the draft does not expressly specify the element of subjective intent. Inaccurate declarations caused by negligence should differ in nature from intentional tax evasion. The absence of an explicit subjective intent requirement risks treating both categories identically. Specifically, for “non-filing” tax evasion, a registered taxpayer is deemed to commit tax evasion merely by failing to file, regardless of subjective state. This rule has been criticised for creating a paradox of “risk arising upon registration”.

Second, late payment surcharge replaces overdue tax penalty, but no cap is set. The daily rate of 0.05% (18.25% per annum) and unlimited accrual remain unchanged. The name change does not alter the legal substance, and its punitive nature may conflict with Article 45 of the Administrative Compulsion Law, which caps administrative late payment surcharges at the principal amount of the debt. Unlimited accrual for long-outstanding tax debts may trigger challenges under the principle of proportionality.

Third, platform liability is ambiguously defined. The draft imposes tax filing obligations on platforms, imposing excessive cooperative duties on e-commerce operators. The newly coined concept of “other online trading platform operators” has an ambiguous scope. Tensions between the model of consolidated filing by platforms and the dispersed registration locations of merchants may also intensify inter-regional tax competition.

Fourth, the broad expansion of tax inspection powers raises concerns over protection of taxpayers’ rights and interests. Tax authorities may deploy big data for risk profiling; inspection scope is substantially widened, with new evidence-gathering measures including sealing, seizure and appraisal. Exit bans may be imposed earlier, during case investigation rather than only at the stage of outstanding tax debts. Balancing expanded powers with personal information protection has also become a focal point of discussion. These controversies reflect public attention and expectations for the revision.

02 Understanding “Deliberated and Approved in Principle” at the State Council Executive Meeting

On August 31, 2026, the Executive Meeting of the State Council deliberated and approved in principle the Draft Revision of the Law on the Administration of Tax Collection. This raises questions: have the numerous public comments and controversies been adopted by the State Council? Have opinions collected by the Ministry of Finance and SAT been translated into specific clause amendments?

A review of publicly released records of State Council Executive Meetings considering legislative drafts shows that “approved in principle” is a commonly used formula for State Council review of bills to be submitted to the NPC Standing Committee. Most bills forwarded by the State Council to the NPC Standing Committee have passed State Council review using this wording. There are exceptions, for instance, on January 4, 2021, the Executive Meeting of the State Council stated it “adopted the Draft Stamp Tax Law of the People’s Republic of China”. The Stamp Tax Law represented transplant-style legislation, elevating mature and stable provisional regulations into statute, with largely unchanged framework and tax burden levels. By contrast, the Tax Collection and Administration Law is undergoing a sweeping overhaul involving broad, profound institutional reforms, justifying the more prudent formulation “approved in principle”.

After a bill is deliberated and approved by the Executive Meeting of the State Council, the Premier signs a proposal to submit it to the NPC Standing Committee for review. In other words, the State Council endorses the framework, rationale and spirit of the revised draft, while details of individual provisions may still be refined in subsequent legislative proceedings. The treatment of these issues will only become known once the full revised draft is published during NPC Standing Committee deliberations.

03 Full Draft Expected to Be Published after First Reading by the NPC Standing Committee

The State Council’s approval in principle and referral to the NPC Standing Committee marks entry into a critical phase of the legislative process. Pursuant to Article 32 of the Legislation Law, a bill placed on the agenda of the Standing Committee shall generally be voted on after three deliberation sessions. Article 33 provides that where opinions are largely consistent, a bill may be voted on after two deliberations; bills involving narrow adjustments or partial amendments may even be voted on after one deliberation.

This revision of the Tax Collection and Administration Law entails substantial changes. More than 25 years have passed since its 2001 revision; tremendous socioeconomic shifts have occurred. The revision addresses numerous issues, affects the vital interests of market participants and bears on socioeconomic development. It will very likely undergo three readings before being put to vote. Under legislative practice, the first reading focuses on necessity, feasibility and rationality of the legal framework; the second reading reviews the appropriateness and workability of key provisions in the second draft; the third reading examines whether major public comments have been properly addressed, with sufficient, reasonable explanations for comments not adopted.

When will the public see the full revised draft? Public consultation on legislative drafts has become institutionalised. In April 2008, the Council of Chairmen of the NPC Standing Committee resolved that all bills under Standing Committee review should in principle be published on the National People’s Congress website. In December 2015, the Council of Chairmen adopted the Working Norms for Publishing Legislative Drafts for Public Comment. The revised Legislation Law of 2023 further stipulates in Article 40 that once a bill is placed on the Standing Committee’s agenda, the draft together with drafting and revision notes shall be published for public comment after the session, unless the Council of Chairmen decides otherwise. The public comment period shall generally be no less than thirty days. A summary of comments received shall be disclosed to the public.

In practice, most bills are opened for public consultation after the first and second readings. Examples include the Amendment (IX) to the Criminal Law, published for consultation after its initial review in early 2014, with the second draft re-opened for comments in 2015; the Draft VAT Law, published after first reading in December 2022 and re-published for consultation in September 2023; the Draft Financial Stability Law, released after first reading in December 2022 and re-opened for public input in June 2024. Following this convention, the full revised draft submitted by the State Council is expected to be released to the public after the first deliberation by the NPC Standing Committee. Comparisons between this version and the March 2025 draft for consultation will reveal revisions made by the State Council in response to public feedback. Material changes to controversial clauses will appear in this text.

04 Conclusion

As the foundational statute governing tax collection and payment relations, the Law on the Administration of Tax Collection provides essential legal safeguards for tax functions. The State Council Executive Meeting noted during deliberation that tax collection must be conducted in accordance with law, tax law enforcement standardised, taxpayer services optimised, taxpayers’ legitimate rights and interests better protected, tax equity promoted and fiscal and tax governance improved. This statement defines the core direction of the revision: both law-based, regulated tax enforcement and protection of taxpayer rights and interests alongside equitable taxation. It is hoped that these contentious issues will be further clarified during NPC Standing Committee deliberations, so that this statute affecting every taxpayer can withstand the test of practice and time.

Running in parallel with the revision of the Tax Collection and Administration Law is a recent wave of new tax rules. For value-added tax, non-taxable transactions have been clarified, and administrative measures for withholding VAT on natural persons by domestic entities issued. For individual income tax, administrative provisions have been released covering offshore trusts, dividends and bonuses for foreign individuals, and transfers of restricted shares of listed companies. For corporate income tax, requirements for filing and document retention for special tax treatment of corporate reorganisations have been streamlined. Separately, the draft revised Rules on Tax Administrative Reconsideration has been released for public comment. These rules cover different taxes and procedural links, forming institutional synergy with the overhaul of the Tax Collection and Administration Law and jointly advancing the rule of law in taxation.