In the News: Consumption Tax Law; Mobile Apps Crackdown; and Constitutional Review Platform
December 08, 2019 | BY
Vincent ChowNew consumption tax draft law puts State Council center stage; major mobile apps caught for illegal data collection practices; and NPC launches online platform for submitting constitutional review requests
China's finance ministry publishes draft consumption tax law
China has released a draft consumption tax law that would give the State Council the power to adjust the tax rates applied to different goods as well as provide exemptions if necessary. The draft law, prepared by the Ministry of Finance and State Taxation Administration and released on Dec. 3, is designed to help build a modern fiscal system, the two agencies said. They are soliciting public comments until Jan. 2.
According to the draft, the current consumption tax framework is largely maintained. The markets had been worried about possible increases in tax rates. Chinese media reports have focused especially on relief among investors in baijiu companies as the tax rate for the popular liquor has stayed the same. The document also outlines 10 tax deduction policies for outsourced taxable consumer goods used for the production of other taxable consumer goods, including cigarettes, wooden disposable chopsticks and wood floors.
A consumption tax is imposed on luxury and environmentally unfriendly goods, such as jewelry and cigarettes. The current consumption tax regime in China was implemented in 1994 and amended in 2008. The State Council mooted potential reform to China's consumption tax framework on Oct. 9 in a notice. Although the draft law does not propose substantial changes to current tax rates, it does put the State Council front and center of any future reforms. Under the new law, the State Council will be able to launch pilot programs trialing adjustments to rates and categories of products subject to taxation. In late November, a draft law lowering value-added tax rates was issued for public comment.
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China takes major apps offline over illegal data collection
China is cracking down on mobile apps that collect personal information illegally. The Ministry of Public Security (MPS) has taken offline around 100 apps in an investigation into several industries including banking and e-commerce, it said on Dec. 4. Infringements of data collection requirements include the lack of privacy agreements, inadequate descriptions of the use of personal information, and the collection of unnecessary personal information.
This latest crackdown on non-compliant apps involve the apps of major companies and institutions including China Everbright Bank, Bank of Tianjin, and online housing rental platform Fang.com. Most of them have been issued warnings and instructions to rectify the issues, while two have been put under criminal investigation. The MPS has punished almost 700 apps in the second half of 2019 for such offenses.
In December 2018, the China Consumers Association said in a report that 91 out of 100 mobile apps it reviewed are suspected of collecting excessive amounts of personal data, including user location, contact lists and mobile numbers. Soon after, in January, the Central Cyberspace Affairs Commission, Ministry of Industry and Information Technology, Ministry of Public Security, and State Administration for Market Regulation launched a joint campaign targeting mobile apps that illegally collect and use personal information. The campaign encourages app operators to voluntarily obtain security certification and encourages search engines and app stores to recommend apps to users that have been certified.
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NPC makes it easier to submit constitutional review requests
China has launched an online platform for citizens and organizations to more easily submit requests for constitutional review of sub-statutory legal documents. On Dec. 4, the Standing Committee of the National People's Congress (NPCSC), China's legislature, officially launched an online "Platform for Receiving Review Recommendations" (审查建议受理平台). Previously, review requests had to be mailed to the NPCSC's Legislative Affairs Commission (LAC).
The NPCSC can review the legality or constitutionality of six types of legal documents: administrative regulations, local regulations, autonomous regulations, separate regulations, special economic zone regulations, and judicial interpretations. NPC Observer, an online blog that covers NPC news, said that the platform is easy to use but has several significant limitations, including not being up to date and being restricted for use by mainland Chinese citizens only.
The LAC carries out reviews of its own volition as well as upon request from third parties. It has reviewed every judicial interpretation filed since 2006, as well as every administrative regulation filed since 2010. Meanwhile, third party requests have soared in the last two years: 1229 in 2018, compared with just 92 in 2016. If a document is determined to be unconstitutional, the LAC will request the authority responsible for the document, such as the Supreme People's Court, to amend it. The request does not compel the authority to comply, although most authorities do and make the necessary amendments. In October 2017, President Xi Jinping called for "advancing the work of constitutional review" during his three-hour speech at the 19th National Congress of the Communist Party.
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