Adding wings to a tiger: data in tax enforcement in China

The first part of this chapter provides a review of the recent advances in tax administration being made at governmental level in China. We then share our observations on improvements in tax management controls and practices at taxpayer level, made in response to enhanced tax enforcement by the tax authorities. We then conclude with a summary of expected future developments in the tax management environment in China.

The 2017 developments in China tax administration have continued the trends mapped out in the 2016 edition of China Looking Ahead, in the chapter, China tax - big data and beyond. Key developments can be summarised under the following three themes:

1. Risk management-driven tax administration;

2. Taking advantage of big data; and

3. Embracing technology.

We will elaborate on each of these three themes in turn below.

In order to improve the effectiveness of tax administration, the State Administration of Taxation (SAT) has been exploring and promoting the adoption of advanced tax risk management concepts and methodologies by provincial and local tax authorities. Circular Shuizongfa [2014] No. 105, SAT Opinion on Strengthening Tax Risk Management, set out key tax risk management tasks for tax authorities. These include tax enforcement goal setting, information collection, risk identification, risk ranking, risk resolution, as well as risk management process monitoring, assessment and feedback. The tax authorities have calibrated their risk management policies separately towards large enterprises, and the wider population of taxpayers, as further discussed below.

Following Shuizongfa [2014] No. 105, a series of tax circulars were issued, including 'Tax Risk Management Guidance for Large Enterprises' issued in 2014, dealing with specific tax risk management policies for cross-border investment, related party transactions, and equity transfers, as key areas of tax enforcement concern with large enterprises.

The Chinese tax authorities have taken an approach whereby they select a sample of large enterprises for analysis (on a pilot basis) in order to better understand the relevant industry, business, and tax risks. They then use this knowledge to determine how best to calibrate the tax risk management mechanisms at tax authority level, as well as to determine what improvements to internal tax risk management controls to demand on the taxpayer side.

For example, the SAT launched the thousand enterprises initiative (TEI) in July 2015. This programme covers about 1,000 representative large group enterprises from different industries. Under this initiative the SAT collects data from the TEI-covered group enterprises and their member entities (through local tax authorities) for tax risk analysis. Based on the analysis, the SAT has built risk analysis models with risk indicators for different industries. This drives improvements in overall tax administration efficiency by providing better support for taxpayers on proactive tax risk management, as well as by developing better approaches for tax officers to screen audit targets and risk areas. The most recent TEI developments include:

• SAT Announcement [2016] No. 67 on the filing of financial statements upon submission of tax returns for 'TEI enterprises' and their member entities, was published on October 26 2016 and took effect from December 1 2016. This requires TEI enterprises to file financial statement information with the tax authorities, both at the time of filing periodic tax returns during the year (i.e. quarterly), and with the filing of the annual tax return (i.e. filed each May following tax assessment year-end). Financial statements (to be supplied in electronic form) include balance sheets, income statements, statements of equity changes, and their disclosure notes, for every legal entity of the group in China.

• SAT Announcement [2017] No. 7 on the management measures for collection of information on the 'Thousand Group Enterprises', was published on March 6 2017 and took effect from May 1 2017. This requires TEI enterprises to report certain entity information to the tax authorities on an annual basis (i.e. each May), which will be maintained on a data platform. This includes, inter alia, details of the taxpayer's responsible tax bureaux, operating locations, industries of activity, parent company, tax payments in prior years, revenue in prior years, and listed status.

Overall in 2016, it was reported that data collection had been completed for 95% of the TEI-covered enterprises; the SAT had completed an industry tree based on TEI data; information sharing mechanisms had been set up between the SAT and the Ministry of Finance (MOF) and the State-owned Assets Supervision and Administration Commission (SASAC); and a risk indicator system and risk analysis platform had been set up. Following on from this initial TEI data collection stage, the authorities are now leveraging their progress to drive tax risk analysis, risk alerts and resolution. As reported by China Tax News in its December 7 2016 article, 'Tax Administration of Large Enterprises Marked Highlights in 2016':

• Six batches of TEI enterprises have been subject to follow-up regarding identified tax risks, leading to an additional tax adjustment of CNY 20.19 billion ($3 billion);

• Branch 5 of the Beijing State Tax Bureau has been assigned to support the SAT to work on the analysis of the TEI information. As a result, 1,356 reports have been put together, covering 11 tax categories, 2,880 risk points, and involving additional tax adjustments of approximately CNY 66 billion.

As noted in tax administration articles in previous editions of China Looking Ahead, the large enterprise division of the SAT set out a framework of large enterprise internal risk controls as guidance for large enterprises in 2011. In May 2016, the SAT outlined their success with these efforts at the annual global meeting of national tax commissioners in the context of the OECD Forum on Tax Administration.

On April 18 2017 SAT Announcement [2017] No. 10 (Announcement No. 10) was issued, instituting an optional tax service to taxpayers to assist them in identifying and correcting tax calculation errors, in advance of formally submitting corporate income tax (CIT) annual filing returns.

Announcement No. 10 clarifies the following:

China's tax authorities have been seeking to pool tax information from a multitude of sources so that they can take advantage of big data analytics to facilitate tax administration. Such efforts include: (1) pooling tax-related data from sources including the taxpayers themselves, financial institutions, other government agencies, and overseas tax authorities; and (2) performing big data analyses, including 'visualisation' techniques, which use business intelligence tools to make sense of massive information flows and data sets.

As mentioned in the 2016 edition of China Looking Ahead, in the chapter China tax - big data and beyond, the SAT is engaged in a whole series of initiatives that maximise tax data resources including (a) moving taxpayers in the direction of completely digitised dealings with the tax authorities, rendering tax data in a form susceptible to pooling and analysis, (b) pooling domestic data from across domestic tax authorities and other government agencies, and (c) international exchange of information (EOI) initiatives. Such initiatives have continued in 2017, with the following notable developments:

• Pooling tax data via the Golden Tax III System: The Golden Tax III System, China's new unified national tax authority IT system, provides for centralised collection of national tax data from all taxpayers registered with the thousands of individual tax bureaux at all levels of government across the country. This covers both local tax bureaux (LTBs) – responsible for local government taxes – as well as state tax bureaux (STBs) – responsible for central government taxes. The Golden Tax III System aggregates data from all taxpayer-authority interactions, including tax and incentive filings, tax payments, tax audits/enquiries, records of outbound payments from China, tax invoice issuance/certification, and information from reviews of taxpayer internal tax controls. This is taken together with web crawler/public website searches on taxpayers, industry profiling information used to assess tax risks, information obtained from overseas tax authorities, and from other domestic agencies, e.g. the State Administration of Foreign Exchange (SAFE), the Ministry of Commerce (MOFCOM), and the General Administration of Customs (GAC). Tax officials in different tax bureaux across China can tap into this system to see the prior interactions that taxpayers have had with tax and other governmental authorities.

• Pooling tax data from financial institutions: Looking ahead, Chinese financial intermediaries are anticipated to become one of the key sources of tax information, especially under the upcoming Tax Collection and Administration (TCA) Law. The draft TCA Law requires Chinese financial intermediaries to bulk report client account transactions, exceeding a certain minimum value, to the tax authorities together with the relevant clients' tax identification numbers (TINs) to facilitate data matching (e.g. cross-checking of individual income tax (IIT) filings) by the tax authorities, and risk 'red flagging'.

  In addition, SAT Announcement [2017] No. 14 on Administrative Measures on Due Diligence Checks on Tax-related Information of Non-residents' Financial Accounts, was published on May 9 2017, and took effect on July 1 2017. This provides the detailed rules under which China is rolling out the OECD's common reporting standard (CRS) for the automatic exchange of tax information – for further details see the separate chapter, A brave new world in tax transparency: CRS in China, Hong Kong and Taiwan. Financial institutions with operations in China are required to register on the SAT CRS web platform by December 31 2017, and must then report to the SAT tax information on the accounts of non-residents held with their institutions (including tax ID, balance, and receipt of different income types) by May 31 every year (starting May 2018).

  Exchanges of tax information between the SAT and other countries participating in the CRS, with which China has established bilateral exchange relationships through the CRS Multilateral Competent Authority Agreement, will commence in September 2018 (China has already nominated 47 of these countries). This will provide a steady stream of information to the SAT on the overseas income and assets of wealthy Chinese individuals and Chinese corporate entities to drive enforcement and support the planned revisions to the IIT Law and the TCA Law.

  We would also note that the People's Bank of China (PBOC) on August 4 2017 issued a notice requiring non-financial institutions, which provide online payment services (referred to as 'third-party online payment service providers'), to operate through a centralised clearing house, starting from June 30 2018 (they will need to connect to this by October 2017). Third-party online payment service providers, such as Alipay (under the Alibaba Group, which runs China's main e-commerce platforms) and Tenpay (under the Tencent Group, which operates China's most popular social media and messaging platform, WeChat), maintain separate bilateral relationships with commercial banks to facilitate payments to or from users' bank accounts. As it stands, banks have no access to payment details, such as the names and locations of merchants paid using Alipay or Tenpay. The new clearing system will facilitate PBOC oversight and may also, in time, give the Chinese tax authorities readier access to taxpayer online transactional data – it remains to be seen if the final draft of the TCA Law provides for this.

• Pooling tax data from e-commerce platforms: E-commerce platforms will also be obliged, under the TCA Law, to provide information on online trader transactions. In parallel, the requirement, in MOF, GAC, SAT, Circular 18 [2016], for e-commerce platforms and couriers to supply business-to-consumer (B2C) import information directly to the customs authorities has already brought significant cross-border e-commerce information on stream. This information can be accessed by the tax authorities through their various information pooling arrangements with the customs and other authorities.

• Centralised IT system for income and property information and trust register: The central government has also been moving, since May 2017, to establish a comprehensive national system for the centralised collection of information on personal income and property holdings. While the set-up of the new system has a number of policy justifications, from a tax perspective it is intended to provide an underpinning for the next wave of planned national tax reforms.

  Complementing this is a move to increase official access to information on asset ownership through trust arrangements. From September 1 2017 China's Administrative Measures on Trust Registration, issued by the China Banking Regulatory Commission (CBRC), come into effect, requiring China trust companies to register trust products that they have issued, including details of the beneficial owners of such products. The CBRC and other government authorities are set to have access to these records – it remains to be seen how much access the tax authorities would have. There is a global trend towards establishing obligations for the registration of the beneficial ownership of trusts with public authorities, with the EU and OECD both developing relevant frameworks. While the proposals in some EU countries look to establish public registers of trust ownership, the Chinese trust register does not yet go this far.

The Chinese tax authorities have been rapidly ramping up their use of big data analytics for tax risk assessment, audit targeting, and audit performance, fuelled by their increasingly linked up, and richer, data pools and inflows. Notable usages are as follows:

• Understanding taxpayer businesses and their industries: The Chinese tax authorities have been seeking to better understand the businesses of taxpayers, and their economic and industrial sector context. This is so that they can better assess whether the tax data they have to hand is indicating unusual tax outcomes, so meriting further investigation. Historically, in order to develop such an understanding, the authorities had to spend extensive time on taxpayer site visits, conducting management and staff interviews as well as desktop reviews of taxpayer documentation. In some cases they also sought to organise semi-formal seminars, with taxpayers and their representatives (e.g. Big 4 tax experts), to gain a better grounding in the business and its tax issues. Such efforts could be very time-consuming and could meet pushback by taxpayers irked by the level of perceived intrusion into their business.

  Increasingly, however, the tax authorities' rich data pools on individual taxpayers and their industries (e.g. entity level sales, purchases, expenses, suppliers and customers, financial performance against local industry outcomes, tax payments as compared with competitors, etc.) enable them to construct 'portraits' of taxpayers. These insights can then drive the focus of tax review and audit work. Going forward, big data analytics can draw together an even broader range of data sources, into ever more complete and nuanced 'portraits', driving a better understanding of the taxpayer business, its industry and competitors, while limiting intrusion and disruption for taxpayers.

• Risk identification: Within the framework of the Chinese tax authorities, two functional divisions in particular have been investing significant effort in the better utilisation of tax data to identify tax risks – the tax assessment functional division and the large enterprise management functional division. Every STB and LTB at municipal level and above, will have separate tax assessment and large enterprise management functional divisions. Both of these divisions take key roles in analysing the internal tax risk of enterprises, and take corresponding tax service and management measures to ensure optimal tax compliance outcomes.

  In a reorganisation of tax authority divisions, undertaken several years back, tax assessment divisions were set up with the specific role of identifying tax risks based on the analyses of tax data. This was done with a goal of bringing a more scientific approach to tax risk identification, as well as to bring greater objectivity and neutrality to the identification of tax audit targets. It had been identified that, in some cases, tax auditors could be guided by overly subjective judgement in their selection and pursuit of particular taxpayers, with overly penal/lenient audit outcomes resulting, depending on the taxpayer-auditor historical relationship. The role and methodology of the tax assessment division in risk assessment/audit targeting has brought greater objectivity and professionalism to the process. It has also been coupled with other measures, such as the 'two randoms' auditing approach to the broad base of taxpayers, which involves random selection of taxpayers for audit and random selection of audit teams to conduct the audit.

  Tax assessment divisions have been developing and optimising a comprehensive set of tax assessment indicators, as powerful tools to use tax data to monitor for and identify tax risks. The indicators use national tax data, segmented by industry, to set a range of benchmark effective tax rates (ETRs) for industries for a certain year. The tax assessment divisions screen taxpayers to identify those with ETRs outside the benchmark range – potential 'at risk' taxpayers will be subject to further qualitative analyses, and explanation requests will be sent to taxpayers. The taxpayer may be prompted to make a 'self-adjustment', i.e. for the taxpayer to reassess whether the original self-assessed tax was correct and adjust where found not to be the case (formal guidance on self-adjustments is set out in SAT Announcement [2014] No. 54 and later SAT Announcement [2017] No. 7). Where there appears to be strong indications that a tax error may have occurred, and particularly where the taxpayer is not willing to contemplate a 'self-adjustment', a tax audit case may be initiated.

  The large enterprise management functional divisions within tax authorities play a key role, alongside tax assessment divisions, in identifying tax risks specifically at large enterprise taxpayers. A formalised approach to large enterprise management divisions goes back to 2008, with the establishment of the SAT large enterprise tax division, and 2011 with the release (with SAT Guoshuifa [2011] No. 71) of guidance for large enterprises on the operation of tax risk management systems. As mentioned above, Branch 5 of the Beijing State Tax Bureau, the large enterprise management functional branch, which was assigned to conduct the analyses on the TEI, identified 2,880 risk items in their analyses in 2016.

  As pooled tax data from all taxpayers, across industries and across government agencies, are now all shared in digital format, tax authorities are able to make vast improvements in the spotting of tax risks.

• Audit target screening: Taxpayers identified, in the analyses outlined above, as exhibiting significant tax risks may potentially be selected for tax audit. Risk assessments are passed from tax assessment and/or large enterprise management divisions to the tax audit function for further investigation. The specialisation and more structured collaboration of different functions within the tax authorities is greatly improving the efficiency of tax administration.

In 2017, the Chinese tax authorities continued to make significant investments in technology, including high capacity IT systems and advanced software applications. This builds upon very significant past investment that has already placed China at the forefront in the sophistication of its tax administrative technology capabilities.

• Data warehousing technology: Investment in data warehousing supports the storage and analysis of massive pooled tax data sets. For example, the Golden Tax III System is segmented into seven types of database, including a legal entity database, an individual database, a tax invoice (fapiao) information database, a tax bureau database, an HR database, a tax risk management database, and a tax regulations database. The data collection and processing activities of these Golden Tax III System databases require the support of powerful data warehousing technology.

• Golden Tax III System: As mentioned above, since 2016 the Golden Tax III System has provided a powerful platform for pooling tax data from all levels of tax bureau, across China, covering both central government and local taxes. Its user interfaces facilitate both taxpayer and tax authority engagement and input, and drive standardisation of certain key data inputs, for example, by requiring taxpayers to input defined goods and service codes before a tax invoice can be issued and printed by the taxpayer. Feedback from both taxpayers and tax officials is continually harvested to fine tune the system.

• Upgraded invoice system: The upgraded system requires taxpayers to input goods or service codes so that the authorities obtain standardised data on what goods or services have been covered by the invoices. This facilitates the tax authorities being able to closely monitor invoice creation to detect fictitious invoices, ensuring the integrity of invoice information and the authenticity of filing data.

• Electronic invoicing system: In December 2015, China rolled out a nationwide transition to the use of electronic VAT general invoices. These are invoices provided to consumers for which no input VAT credit is being claimed. Following success with this step, the next stage is the rollout of electronic VAT special invoices – these are the tax invoices provided to taxpayers to enable them to claim VAT input credits, which are more tightly controlled. With a fully electronic invoicing system in place, taxpayers will be able to access, through their online accounts with the tax authorities, complete digital information on their invoices on a real-time basis, facilitating management of VAT input credit claims, system data verification, and VAT payments. Electronic tax invoicing also dovetails with the transition of businesses to more integrated systems of book keeping and accounting, which in future will automatically compile bank, tax and other payment and invoicing information to produce business records with much reduced human input.

Along with the developments in tax administration at governmental level, there have been many notable tax management improvements at taxpayer level in China, including:

1. Increasing use of tax internal controls;

2. Use of tax technology to improve tax management;

3. Centralisation of tax functions using tax shared services centres; and

4. Tax management transition from in-house back office function, out to market.

We review these developments individually below.

Increasingly larger enterprises in China, especially large multinational companies and state-owned group companies, have started to build up tax internal controls by themselves or by engaging external advisers. This has been stimulated by the increasing tax authority demands for taxpayer self-inspections/adjustments, driven, as noted above, by their more sophisticated risk targeting. It has also been stimulated by the parallel efforts of the SAT to promote better internal tax risk management by taxpayers – taxpayers wish to show the tax authorities that they are responding to these prompts, and are working hard to improve the transparency and standardisation of internal tax management.

The focus of improved tax internal controls depend on the priorities of a given taxpayer:

• General tax management framework: Framework documents can be drafted to ensure that the in-house tax function and business, legal and finance functions, are all clear on the firm-wide tax management goals and their required collaborative roles in achieving the goals.

• Standardised tax work flows and control points: These provide step-by-step instructions to ensure a high level of work quality for each tax action (e.g. tax filing or fapiao issuance) with specific guidance and reminders for persons acting as critical control points.

• Tax handbooks tailored for specific business lines or tax categories: These provide transparency and standardisation for tax related tasks. They can be used as a reference guide by tax people to understand business operations, and so provide better support to front-end business staff, when carrying out their tax tasks. They can also be used by front-end business staff for a general understanding of the potential tax implications of different business actions. This can guide them in involving tax people at the right point of time so as to factor tax considerations into business decisions.

• Standardisation of tax accounting: Chinese enterprise groups have been increasingly seeking to standardise their group tax accounting, including the set-up and use of tax related accounts. The increasing complexity of VAT tax accounting has given a push to this development. Following the completion of the transition from business tax to VAT reform in May 2016, the MOF in December 2016 released Circular Caikuai [2016] No. 22 on VAT accounting regulations setting out how more than 18 accounts should be used for VAT accounting. Standardisation of tax accounts help to facilitate tax work by decreasing the need for making book to return adjustments and decreasing the scope for errors as well.

In addition to setting up internal controls for domestic tax management, some state-owned enterprises engaged in increasing outbound investment have extended these to overseas tax management. While, at an earlier point in time, internal tax controls were set up to rely on manual procedures (e.g. written guidelines, workflows and handbooks for in-house tax people to follow), it was quickly acknowledged that, very often, internal control documents were just being put on the shelf without being referred to regularly. This has led to a greater push to utilise technology to embed standardised tax workflows, control points, and tax treatment in the enterprise business environment, through tailored, IT-based tax management systems.

Certain advanced taxpayers are building tax management software solutions customised to cater to a range of IT-based tax functions/modules:

• Invoice management: This module can include both output invoice management and input invoice management functions. An output invoice management module typically connects operational software to an enterprise's transactional business data in order to conduct functions such as automated invoice issuance, VAT calculation and even VAT accounting data processing. The latter function directs the accounting system to make revenue recognition ledger entries. The module can also be directed to automatically generate VAT liability vouchers. Input invoice management can include the collection of input invoice data through using a scanner or manual input. Alternatively, input invoice data can be downloaded from the central invoice database maintained by the tax authorities. The function can also automate the verification of invoices.

• Tax filing: The tax filing module aims to produce tax returns by connecting to the source data from finance or business systems, and doing the book to return reconciliations automatically. Nearly all Chinese tax categories can be automated to a certain extent, including VAT, corporate income tax, and stamp duty.

• Tax risk assessment: The tax risk assessment module aims to help taxpayers to set up a system of tax risk assessment indicators. It can automatically identify tax risks for selected periods on a continuous basis. Such systems could, of course, be greatly enhanced if the Chinese tax authorities provided greater disclosure on their tax risk indicators, though there is as yet no indication from the authorities that they plan to do so in the near future.

• Other modules: Other modules such as statistical analysis, regulations pool, archival of tax documents, etc. are available for taxpayers.

Vendors of tax technology solutions typically come from two different service sectors: (1) traditional tax service providers, such as the Big 4, and (2) software solutions companies. The implementation of tax management software requires both the knowledge and expertise of tax advisers and that of the software vendors. Traditional tax advisers have started to hire IT talents to develop all-round tax management software solutions for clients. Conversely, software companies have also started to hire some tax people to oversee the tax part of the work, and in particular for engagement with the in-house tax teams of their clients.

Tax technology cannot be effective in isolation from other business information systems. Data flows between the existing enterprise resource planning (ERP) and finance systems and the tax management system must flow in two directions. The systems need to be integrated, a process spurred by the anticipated widespread automation of business, finance and tax functions. Tax automation through technology is expected to significantly increase tax work efficiency, and release tax people from time-consuming routine work, so that they can focus better on providing higher-end tax support to the company.

While tax shared services centres have been in use by multinational companies, such as General Electric and Siemens, for some time, they are still uncommon in domestically owned Chinese companies. However, together with the progressive adoption of tax management software solutions by Chinese enterprises, certain state-owned or private-owned groups have seized the opportunity to centralise their tax functions by setting up tax shared services centres.

In line with the centralisation of finance functions, where accounts receivable, accounts payable and expense reimbursements would usually be centralised, one or more of the following functions can be moved into the tax shared services centre:

• Invoice management;

• Tax filing;

• Tax accounting; and

• Tax advisory.

Setting up a tax shared services centre is an organisational change. It involves the restructuring of tax functions, relocation of people, change of reporting lines and change of work allocations. While it is not suitable for all taxpayers, it can work very well for large groups with great tax leaders and tax talents.

Another notable China development has been the decision, by the in-house tax teams of some large Chinese enterprises, to go out to market to provide tax services to other companies. This can be, for example, a service to design the functions, flows and interface of tax management software solutions for other companies.

Traditionally, external tax advisers have been criticised for not having a sufficiently robust understanding of particular businesses, or existing in-house practices. It has been asserted that where advice does not have sufficient regard for how the internal tax function connects to and interacts with other business functions, this advice may not be fully actionable. Consequently, the provision of tax management technology/platforms by other companies within the same industry has a certain appeal. This development is certainly stimulating traditional tax advisers to refine their service offerings to get closer to the core needs of businesses.

Building on our analysis above, we foresee the following notable developments in the near future.

As noted above, the Chinese tax authorities have been pushing taxpayers to disclose more information so that they can better understand taxpayer businesses, financials, and industries, and thereby interpret more precisely tax data to drive enforcement action.

We consider that, complementing this, a commitment to two-way transparency by the Chinese tax authorities, such as in relation to tax authority work methodologies, would bring benefits for both tax authorities and taxpayers. For example, if tax authorities disclosed to the taxpayers how they set tax risk indicators to screen for tax risks, and/or share the summary conclusions of industry-wide investigations or TEI analysis results, this could encourage taxpayers to do self-review and self-adjustments, lessening the demands on tax investigation resources at tax authority level.

Greater transparency by the tax authorities could be considered for the following items:

• The risk indicators used by the tax authorities to identify tax risks (including those for specific industries) – disclosure of these would provide guidance to help taxpayers set up their own tax risk indicators to prevent or detect tax risks;

• The cross-checking methodology used by the tax authorities in comparing tax return and financial statement data (e.g. as used for the tax risk alert services for corporate income tax annual filing) – disclosure of this would enable taxpayers to cross-check these items by themselves before a tax submission;

• More guidance for taxpayers on how to set up tax internal controls or tax risk management systems.

Two-way transparency would greatly assist in promoting more effective and efficient tax administration and tax management, at the level of both tax authorities and taxpayers.

As discussed above, we are seeing both tax authorities and in-house tax functions embracing tax technology at an accelerating speed and scale. For taxpayers, embracing tax technology releases tax people from routine tax work, making them available for more sophisticated tax work requiring tax expertise and tax professional judgement. In this regard a very valuable contribution is the role of tax people as business partners, providing timely tax advice to front-line business staff. This moves the in-house tax function significantly up the value chain in Chinese enterprise groups – a very positive trend development for the future, as Chinese enterprises become more sophisticated and expand into foreign markets.

Tracy Zhang

Partner, Tax KPMG China 8th Floor, Tower E2 Oriental Plaza Beijing 100738, China Tel +86 10 8508 7509 tracy.h.zhang@kpmg.com Tracy Zhang has more than 21 years' tax advisory experience in the financial services industry. Tracy is the financial services national tax lead partner at KPMG China, specialising in banking, insurance, real estate funds and leasing. Tracy is also KPMG national lead partner for tax transformation. She has been seconded to KPMG Holland to study the Dutch horizontal monitoring system and has established extensive knowledge and experience in tax risk control and tax technology. She has led professional teams in assisting a number of state-owned enterprises to establish or improve their tax risk control systems.

Fang Wei

Senior Manager, Tax KPMG China 8th Floor, Tower E2, Oriental Plaza 1 East Chang An Avenue Beijing 100738, China Tel: +86 10 8508 7535 fang.wei@kpmg.com Fang Wei has advised a variety of clients on both corporate tax issues and transfer pricing issues arising from tax planning, restructuring, compliance, audit defence, tax internal controls, and tax technology. Fang also has in-house tax work experience. Fang services clients in a wide range of industries including financial services, construction, consumer and industrial markets, and internet companies, covering multinationals, state-owned enterprises, and privately-owned enterprises.

Anthony Chau

Partner, Tax KPMG China 26th Floor, Plaza 66 Tower II 1266 Nanjing West Road Shanghai 200040, China Tel: +86 (21) 2212 3206 anthony.chau@kpmg.com Anthony Chau started his tax advisory career in 1999 with the corporate tax department of KPMG Sydney. Upon returning to Hong Kong in 2000, Anthony started practising in the areas of China taxation, customs duty and business advisory matters. Anthony was stationed in Guangzhou and Chengdu before he was relocated to KPMG in Shanghai in July 2010. Besides his tax-related roles in Shanghai, Anthony has also continued to manage the tax practice of KPMG in Chengdu and also leads the trade and customs practice of central China. Over the years, Anthony has advised multinational clients on their expansion plans, holding structures, operations, cross-border transactions, as well as on their restructuring matters from taxation and business regulatory perspectives. He has also assisted numerous clients to negotiate with the tax/customs authorities throughout China on their daily compliance and audit matters. In view of his experience in the various China locations, Anthony has gathered extensive local knowledge and expertise in assisting multinational companies in establishing the relevant types of entities depending on their business objectives and needs. He has also successfully assisted such companies to obtain tax and local financial incentives for their investments. Anthony also works on numerous tax due diligence projects for both inbound and outbound investors across numerous industries.

Lilly Li

Partner, Tax KPMG China 21 Floor, CTF Finance Centre 6 Zhujiang East Road, Zhujiang New Town Guangzhou 510620, China Tel: +86 20 3813 8999 lilly.li@kpmg.com Lilly Li is the head of tax in southern China. She is based in Guangzhou and specialises in business and tax advisory services for corporate restructuring, cross-border tax-efficient value chain planning, tax-efficient transaction advisory of mergers and acquisitions (M&A) and initial public offering (IPO) projects. Lilly provides China-based corporate tax advisory and transfer pricing services to multinational and domestic enterprises. Her experience covers a wide range of industries, for example, consumer markets, automobile, electronics, property and infrastructure. Lilly has extensive experience in dealing with tax disputes and tax policy lobbying. For example she and her team have successfully assisted 13 Asia Games sponsors in applying for business tax exemption with the State Administration of Taxation (SAT); also they have assisted a number of listed groups in lobbying the SAT for the tax ruling which allows China companies to deduct stock option experiences before corporate income tax (CIT). Before joining KPMG, Lilly worked with the China Tax Bureau and the Australian Tax Office in the areas of international tax administration, tax audit and transfer pricing. Lilly is a member of Certified Practising Accountants Australia.