Non-Tax Fiscal Revenue
34 Non-Tax Fiscal Revenue
In accordance with State Council rules, the tax department uniformly collects non-tax fiscal revenue for the following items:
- Educational surcharge.
- Mining district use fee.
- Cultural construction fee.
In addition, the People's Government of every province/autonomous region/municipality directly under the State Council may rule that the tax department shall collect social security fees for the following schemes:
- Basic pension insurance.
- Basic medical insurance.
- Unemployment insurance.
- Industrial injury insurance.
EDUCATIONAL SURCHARGE
Background
The surcharge is collected by the government for the purpose of developing educational causes. The revenue collected is put into special educational funds.
On April 28, 1986, the State Council promulgated the Provisional Rules for Collecting the Educational Surcharge, which came into effect on July 1 of the same year. On June 7, 1990, the State Council revised the rules.
The Education Law of the People's Republic of China passed by the National People's Congress (NPC) in 1995 and the Provisional Rules stipulate that the surcharge shall be collected by the tax department. At present, it is collected by the offices of the State Administration of Taxation (SAT) and the local tax bureaus. The revenue collected is included in the financial budget that has been earmarked exclusively for educational funds under the uniform administration of the educational administration department.
In 2003, revenue from the surcharge amounted to 23.3 billion yuan.
Payers
The payers of the surcharge include units and individuals that are liable to pay Value-Added Tax (VAT), Consumption Tax, or Business Tax.
Excluded are those who pay countryside educational surcharge, or those who pay VAT or Consumption Tax on imported goods in accordance with prevailing rules.
Scope, Base and Rates
In general, the surcharge is based on the VAT, Consumption Tax, or Business Tax actually paid by taxpayers.
The surcharge rate is 3% (reduced by half for cigarette producers).
Computation Methods
In general, the following formula is used to compute the surcharge payable:
Surcharge payable = Base × Applicable rate
Example
An enterprise paid VAT of 1 billion yuan for the month. The applicable rate for the educational surcharge is 3%.
Surcharge payable = 1 million yuan 3% = 30,000 yuan
Collection
The surcharge should be collected at the same time that VAT, Consumption Tax, or Business Tax is collected.
MINING DISTRICT USE FEE
Background
The fee, charged on the utilization of mineral resources, is collected on fixed standards.
Upon approval by the State Council, the Ministry of Finance promulgated the Rules for Collecting Mining District Use Fees on Exploitation of Offshore Oil Resources on January 1, 1989, which came into effect on the same date. It also promulgated the Provisional Rules for Collecting Mining District Use Fees on Sino-Foreign Cooperative Exploitation of Onshore Oil Resources on January 15, 1990, which came into effect on January 1, 1990.
The rules stipulate that the tax department is responsible for collecting and administering the fee. At present, the fee is collected by the SAT offices and the local tax bureaus. In 1995, the 1990 rules were revised.
Payers
The following units are among the entities liable to pay the fee:
- Chinese enterprises or foreign enterprises exploiting offshore oil resources by law in China's inland seas, territorial seas, or continental shelf, or in other marine territories within China's jurisdiction.
- Chinese enterprises or foreign enterprises exploiting onshore oil resources within China on a cooperative basis.
Scope, Base and Rates
The chargeable base is the total output of unrefined oil/natural gas from each offshore/onshore oil/gas field in a calendar year.
The fee payable is computed based on this output and paid in kind.
It is levied at progressively higher rates on that portion of the oil/natural gas output of the enterprise that exceeds the threshold.
The rate ranges from 1% to 12.5%.
Collection
The fee is computed on an annual basis, and collected by time or in installments.
Payments are finalized at the end of the year.
CULTURAL CONSTRUCTION FEE
Background
The fee is collected by the government for the purpose of guiding and regulating the development of cultural causes. The revenue collected is used to set up special funds for cultural construction.
On September 5, 1996, the State Council promulgated the Various Rules of the State Council on Further Improving the Cultural and Economic Policies. One of these rules stipulates that, from January 1, 1997, the fee shall be levied across the country, and shall be collected by the local tax bureaus.
On July 7, 1997, the Ministry of Finance and the SAT promulgated the Provisional Method of the Administration and Collection of the Cultural Construction Fee, upon approval by the State Council.
The revenue collected is included in the financial budget for the State and for every province/autonomous region/municipality directly under the State Council.
Payers
The payers include various categories of units and individuals who pay Business Tax on entertainment or advertising activities.
Scope, Base, and Rates
The fee is based on the Business Tax taxable turnover of the taxpayers from entertainment and advertisement.
The rate charged is 3%.
Any rate adjustments must be decided by the State Council.
Computation Methods
In general, the following formula is used to compute the fee payable:
Fee payable = Turnover from entertainment/advertising subject to Business Tax × 3%
Example
A dancing hall has turnover of = 600,000 yuan that is subject to Business Tax for the month. Fee payable 600,000 yuan 3% 18,000 yuan
Collection
The fee is collected by the local tax bureaus at the same time that the corresponding Business Tax is collected on entertainment/advertising turnover.
SOCIAL INSURANCE FEE
Background
This fee is similar in nature to the social security tax levied in many other countries. It is a special fund collected by the government for the purpose of developing social insurance causes (e.g., basic pension insurance, basic medical insurance, unemployment insurance, industrial injury insurance).
On January 22, 1999, the State Council promulgated the Provisional Regulations for Levying the Social Insurance Fee, which came into effect on the same date.
The regulations stipulate that the People's Government of provinces/autonomous regions/municipalities directly under the State Council shall determine the collecting organ, which may be the tax department or the social insurance agency set up by the labor security administration department in accordance with the prevailing rules.
At present, more than 10 provinces/autonomous regions/municipalities directly under the State Council have authorized the local tax bureaus to collect the fee.
Payers
The payers vary depending on the insurance scheme involved.
Basic Pension Insurance
For this type of insurance, the payers include the following entities:
- State-owned enterprises (SOEs).
- City and town collective enterprises.
- Enterprises with foreign investment.
- Urban and township private enterprises.
- Other city and township enterprises and their employees.
- Institutions managed as enterprises and their employees.
The People's Government of every province/autonomous region/municipality directly under the State Council may, based on local conditions and practical necessities, extend basic pension insurance to include city and town individual household enterprises.
Basic Medical Insurance
For this type of insurance, the payers include the following entities:
- SOEs.
- City and town collective enterprises.
- Enterprises with foreign investment.
- Urban and township private enterprises.
- Other city and township enterprises and their employees.
- Government organs and their staff.
- Institutions and their employees.
- Private non-enterprise units and their employees.
- Social organizations and their permanent staff.
The People's Government of every province/autonomous region/municipality directly under the State Council may, based on local conditions and practical necessities, extend basic medical insurance to include city and town individual household enterprises.
Unemployment Insurance
For this type of insurance, the payers include the following entities:
- SOEs.
- City and town collective enterprises.
- Enterprises with foreign investment.
- Urban and township private enterprises.
- Other city and township enterprises and their employees.
- Institutions and their employees.
The People's Government of every province/autonomous region/municipality directly under the State Council may, based on local conditions and practical necessities, extend unemployment insurance to include the following entities:
- Social organizations and their permanent staff.
- Private non-enterprise units and their employees.
- Individual households that hire employees.
Industrial Injury Insurance
For this type of insurance, the payers include the following entities:
- Various enterprises.
- Individual households that hire employees. The employees do not need to pay the fee themselves.
Scope, Base, and Rates
Basic Pension Insurance
Currently, rates are charged as stipulated by the Decision of the State Council on Establishing the Uniform Basic Pension Insurance System for Employees, on July 16, 1997.
Employers
In general, the fee paid by enterprises should not exceed 20% (including the portion transferred into the personal account) of the total wages paid by the enterprises.
The specific rate shall be decided by the People's Government at the provincial level. Where special circumstances necessitate raising the rate above 20%, the cases should be reported to the Ministry of Labor and Social Security and the Ministry of Finance for approval.
Employees
For employees, the fee shall not exceed 8% of their wages.
Where an employee's wages exceed 3 times the local wage average, the portion that is in excess shall not be included in the chargeable base.
Where an employee's personal gross wages are less than 60% of the local wage average, the chargeable base shall be equivalent to 60% of the average.
Basic Medical Insurance
Currently, rates are charged as stipulated by the Decision of the State Council on Establishing the Basic Medical Insurance System for Urban and Township Employees, on December 14, 1998.
However, as the economy develops, the rates may be adjusted for both employers and employees.
Employers
The fee paid by employers should be equivalent to about 6% of the total wages paid by the units.
Employees
The fee paid by employees should be equivalent to 2% of their wages.
Unemployment Insurance
Currently, rates are charged as stipulated by the Regulations on Unemployment Insurance, promulgated by the State Council on January 22, 1999.
Upon approval by the State Council, the People's Government at the provincial level may adjust the rates for their own jurisdictions based on local conditions.
Employers
The fee paid by urban and township enterprises or units should amount to 2% of the total wages paid by the enterprises or the units.
Employees
The fee paid by employees should amount to 1% of their wages.
Industrial Injury Insurance
Currently, rates are charged as stipulated by the Regulations on Industrial Injury Insurance, promulgated by the State Council on April 27, 2003, and the rules laid out by the Ministry of Labor and Social Security, and the Ministry of Finance.
Average Rates
The People's Government at the provincial level shall control the average rates. Rates for each sector shall vary depending on the level of risk involved.
The average rate shall be maintained at about 1% of the total wages of the employees. For employing units in low-risk, medium-risk, and high-risk sectors, the average rate shall be maintained at about 0.5%, 1%, and 2%, respectively.
Specific Standards by Sector
The labor and security departments, together with the financial, health, and safety monitor departments, shall put forward specific standards for basic average rates by sector, after factoring in the following considerations:
- According to the principle of spending determining the revenue and balance of revenue and spending.
- The utilization of the insurance.
- The frequency of industrial injuries.
- The extent of the professional disease threat.
These departments should obtain approval from the local governments before execution. The specific standards may be adjusted periodically.
Floating Rates
For employing units, rates may be floated depending on the sector.
- Low-risk: The fee shall be paid at the basic rate, without floating.
- Medium-risk: Floating rates shall apply.
- High-risk: Floating rates shall apply.
The first payment of the fee by an employing unit should be based on the basic rate for the sector. The rate shall float every 1–3 years depending on the following factors:
- The utilization of the insurance.
- The frequency of injuries.
- The extent of the professional disease threat.
Extent of the Float
From the basic rate for each sector, the rate may float up or down by 2 levels.
- Upward: The first level is up to 120% of the basic rate; the second level is up to 150%.
- Downward: The first level is down to 80% of the basic rate; the second level is down to 50%.
The specific flotation method shall be worked out by the labor security department together with the financial, health, and safety monitor departments.
Collection
Fees for basic pension insurance, basic medical insurance, unemployment insurance, and industrial injury insurance shall be paid and collected on a consolidated and uniform basis.
Registration and Declaration
Units subject to payment shall register with the local social insurance handling institutions and participate in the social insurance schemes.
The paying units shall declare payments on a monthly basis to the institutions. After verification by the institutions, the fee shall be paid within the time limit as specified.
Fees payable by individuals shall be withheld from their wages by the employing units.
Assessed Fees
Where the paying units fail to declare or pay the fee in accordance with the prevailing rules, the social insurance handling institutions shall temporarily assess the fee payable at 110% of the fee paid by the unit in the preceding month.
Where no fee was paid in the preceding month, the institutions shall assess the fee payable based on business conditions and the number of employees under the units.
Where the paying units finally complete the declaration formalities and pay the fee as assessed in accordance with the relevant rules, the institutions shall settle the payment in accordance with the relevant rules.
Late Payments
The paying units or paying individuals should pay the fees in full and in a timely fashion. Where the paying units fail to pay or withhold the fees in accordance with the relevant rules, the labor security administration department or the tax department shall order them to pay by a specified deadline.
Where they fail to pay by the deadline, they shall be charged interest on the late payments, at a rate of 0.2% of the arrears each day, starting from the date that the fees fall into arrears. In addition, they must make good the arrears.
Where the paying units refuse to pay the fees or the interest on the arrears, the labor security administrative department or the tax department shall apply to the court for enforcement of the collection.
Reductions and Exemptions
No reduction or exemption shall be applied to social insurance fees.
Social Insurance Fund
The revenue collected from social insurance fees is put into the social insurance fund for the setting up of the basic pension insurance fund, the basic medical insurance fund, the unemployment insurance fund, and the industrial injury insurance fund.
The social insurance fund conducts independent accounting, is earmarked for special use, and is not subject to any tax or fee.
Payment Transparency
- Paying units: They should make public the payments every year so their employees can monitor their actions.
- Social insurance handling institutions: They should regularly announce to the public any information concerning the collection of the social insurance fee so the public can monitor their actions.