According to the Opinions on Further Deepening the Reform of Tax Collection and Administration issued by the Central Office and the State Office, it is the goal of China's tax supervision development and reform to realize the change from "tax management by votes" to "tax management by numbers" classification and precise supervision. It is necessary to comprehensively improve the way of tax payment and optimize the personal tax service. The Five-Year Work Program for Deepening the Reform of the National Tax System (2018-2022) (Taxation General Fa [2018] No. 199) also proposes to improve the tax supervision system for natural persons. Recently, many tax authorities have begun to upgrade the tax control system for natural persons, and in the context of "Golden Tax IV" will be completed soon, how to do a good job of tax compliance and avoid tax risks for natural persons, which is briefly analyzed in this article for readers' reference.

Ⅰ. Upgrading Tax Supervision System for Natural Persons? Sound supervision is the general trend

(Ⅰ) Many places bidding for the construction of natural person tax supervision platform

On October 31, 2022, a local tax bureau announced the procurement contract of "2022 Natural Person Monitoring Platform Upgrade", aiming at the tax supervision of natural person's equity transfer.

Not coincidentally, some time ago, a municipal tax bureau briefly announced a tender notice on its official website. According to the announcement, the city needed to upgrade the existing natural person tax application platform (Phase III) for the purpose of "improving the natural person tax management system focusing on high-income and high-net-worth". Once the announcement was made, it aroused widespread concern and discussion. However, we have noticed that the information of the announcement has been deleted from the official website of the tax bureau.

In fact, the city's Natural Person Tax Application Platform (Phase III) was only awarded the tender to start construction in September last year, and just over a year has passed so far. According to the bidding documents of last year's tax application platform for natural persons (Phase III), the main functions of the tax application platform for natural persons are focused on remittance, special deduction, and audit of tax rebate doubts, etc. It is not difficult to imagine that, since the new "Individual Income Tax" comprehensively pushes forward the annual remittance of individual tax for natural persons, the vast number of natural person taxpayers has brought considerable audit pressure and costs to the tax authorities. Since the beginning of this year, Shenzhen and other places have also announced cases in which natural persons have not completed the remittance on time in accordance with the law and have been chased after to pay the contributions and late payment fees.

In addition, according to some information disclosed on the Internet, the construction of the "fourth phase" will focus on the review of personal tax returns and the verification of clues on the transfer of personal equity. In our opinion, the relevant information should not be over-interpreted. Today, with the development of informatization, electronics and data, it is possible to optimize tax declaration through the Internet and cell phone software, and even full electronic declaration and delivery, and the so-called natural person tax application platform is more for the purpose of optimizing tax declaration.

(Ⅱ) Gradual Realization of the Goal of Improving the Tax Administration System for Natural Persons

Improving and perfecting the tax administration system for natural persons has always been one of the goals of China's tax reform. This goal is put forward in the document "Five-Year Work Program for Deepening the Reform of "Release Management and Service" in the National Tax System (2018-2022)" (Taxation General Issue No. 199 [2018]). The Work Program proposes to gradually improve the regulatory system in terms of both service and collection and management methods.

In terms of service, it is necessary to establish a service mode and system of "real-name authentication + tax preparation reminder + information push + complaint consulting". This is also mainly to solve the problem of the lack of personal tax services of the tax authorities in the past, with the individual income tax remittance, relying on the Internet and cell phone software to build an information-based individual income tax platform, tax handling is more convenient and comfortable, but also conducive to raising the awareness of the natural person's tax.

In terms of collection and management, it is necessary to establish a collection and management system of "one-person file + risk co-management + credit guidance + classification and grading". This kind of one-person file, classification and grading of the collection and management model has been commonplace in the field of corporate income tax supervision, but it will take some time to apply and develop in the field of personal income tax, especially because the number of natural persons is too large, and it is too much pressure to rely only on tax staff unless it relies on the means of big data, artificial intelligence, etc. Therefore, it is possible to look forward to the "Golden File", which will be the first tax administration system in China. Therefore, we can look forward to the role of "Golden Tax IV" in personal tax supervision.

(Ⅲ) Personal tax supervision is gradually improving, and the risk of tax evasion is high.

Network entertainment, live streaming with goods, refusal to fulfill the remittance ...... Since last year, a large number of typical tax cases have been announced in the field of personal tax, which demonstrates the country's determination to promote the soundness and perfection of tax supervision. With the increasing legalization of taxation in China and the accelerating pace of "ruling by tax", every taxpayer should establish the awareness of paying tax in accordance with the law, so as to avoid being caught up in tax-related risks. Among them, some high-income, high-net-worth people should do a better job of their own tax compliance.

Ⅱ.  what groups of people need to pay special attention to tax compliance when the tax regulation of big data governance is strengthened?

(Ⅰ) Bank account supervision is strengthened, and self-employed persons in the retail industry should pay attention to compliance.

Since this year, there have been a few tax and bank linkages. Mainly based on the prevention of telecommunications fraud, money laundering and other reasons, banks have especially strengthened the supervision of a type of account for individuals. Individual business households themselves are operated on a household basis, and the funds received and paid using their own personal bank accounts. If the flow of funds is too much or abnormal, it may trigger the bank's regulatory warning, and may even freeze individual accounts. Typical examples are the operation of recycling of waste materials, trading of large quantities of goods, long-distance freight transportation and other businesses. Especially waste materials recycling and part of the trade industry, belonging to the typical "small profits and high sales", "volume to win", short-term personal accounts fast into and out of large sums of money, some may even go more than 5 million yuan in a month, you may face the risk of the bank card is frozen. The risk of freezing the bank card may be faced.

With the sharing and interoperability of clues between the tax authorities and banks, these huge amounts of capital flows will also bring tax-related risks to individuals. Individual industrial and commercial households can adopt the approved levy because they do not keep books of accounts, but the approved levy usually only takes into account the individual's income. Then, when the funds come in and go out quickly and the flow of water is huge, but the actual profit is very meager, the approved income based only on the income of the account will be far more than the tax burden that should be borne, which deserves the attention of the vast number of natural person taxpayers engaged in the retailing, trading and other industries.

(Ⅱ) High-income people focus on tax compliance and file tax returns in accordance with the law

In addition to individuals engaged in the retail industry, there are some high-income groups that are also the focus of tax compliance. For example, corporate executives, webcasters, and celebrities. As individuals' incomes rise, their income tax rates also increase step by step, so some behaviors of changing names and splitting incomes emerge. For example, with the implementation of the "personal tax APP", many people find themselves inexplicably become employees of certain enterprises, and actually have a salary every month. This kind of behavior will be gradually controlled with the development of big data and information technology.

In addition, the state has also further cleaned up the illegal tax approval and financial refund policy nationwide, which makes some conditions of using tax depressions to enjoy the approved policy no longer exist in the past, therefore, timely completion of their own remittance, more refunds and fewer compensations, and legal compliance with the tax, in order to avoid being involved in the risk of tax evasion.

(Ⅲ) Recognize the income from equity investment, declare and pay personal tax can not be forgotten.

With the development of various private equity investment funds, the phenomenon of utilizing partnerships, companies and trusts for investment has become very common. However, the dismantling of the fund structure at the end of the investment requires focusing on the issue of personal income tax. As changes in equity are related to business registration, registration of business changes is essential when dismantling the investment structure. With the data linkage and information sharing between the business and tax departments, the tax authorities can detect and intervene in equity change transactions early. So far this year, the news has repeatedly reported that tax authorities in many places have discovered the clues of equity change through the big data platform, and intervened in the transaction in advance to ensure that the tax is fully deposited into the treasury. It can also be seen that big data can indeed play a key role in discovering and summarizing tax-related risk clues.

(Ⅳ) Ordinary natural persons should also do a good job in the annual remittance, more refund and less compensation.

In the past, China's tax supervision for natural persons is not very sound, the majority of individuals have a relatively low tax awareness, so for the payment of personal tax issues, there is some resistance, and secondly, really do not understand, not clear how to do. For this reason, the General Administration of Taxation (GAT) has repeatedly implemented the "Spring Breeze Action for Convenient Taxation" to popularize tax policies. In addition, the General Administration of Taxation has also formulated the policy of "first violation of impunity" in response to the problems of natural persons' remittance and payment and untimely tax declaration. As long as the taxpayers can be persuaded by the tax authorities to pay taxes in time, they can be exempted from administrative penalties and avoid certain risks.

Ⅲ. How can natural persons stay away from tax-related risks? Raising compliance awareness is the key

(Ⅰ) Follow up the tax policy, complete the remittance, and enjoy the tax benefits.

Economic life is changing day by day, and so is the tax policy. Therefore, it is very necessary to learn tax policies, laws and regulations that are closely related to you. For example, the State Administration of Taxation (SAT) has just issued special tax policies for personal pensions and house replacement, and special deductions are available for some specific reasons. These policies require individuals to take the initiative to declare to the tax authorities, or by the withholding agent on behalf of the incumbent.

(Ⅱ) Elimination of yin and yang contracts, high risk of false declaration

A "yin and yang contract" means that the actual transaction is one kind of contract, but the transaction used for tax declaration is another contract. The contract for tax declaration agreed low or even no income, but privately agreed income is very high. Hiding income through shady contracts is a widely known method of tax evasion, although the risks of this method are high. On the one hand, if the two parties to a contract have a dispute over the performance of the contract and go to court, the court will declare the apparent "yang" contract invalid and confirm the validity of the "yin" contract. At this point, once the judgment, the tax authorities can take the court's effective judgment documents to recover the tax. On the other hand, the contract transaction can not do "seamless", in practice, there are some false declarations of clues are provided to the tax authorities by informants.

(Ⅲ) Concealed income "do not declare", does not mean that there is no risk

Some large transactions, no matter how to hide there will be traces and clues, such as equity transactions, real estate sales, off-the-books business private collection. On the one hand, as long as it involves the registration of tax-paid changes, such as equity, real estate, etc., now require proof of tax-paid. If the tax-paid price is low or the transfer is simply at a loss, it is likely to trigger the big data monitoring system of the tax authorities, thus facing the risk of being audited. On the other hand, banks, industry and information technology, taxation, industry and commerce, customs and other departments have formed a preliminary information sharing mechanism, if the clues of tax evasion are grasped by other administrative organs, they will also be pushed to the competent tax authorities, which can be said to be "Heaven's net is wide open".

(Ⅳ) Illegal issuance of business commission and bonus to executives

In practice, many enterprises to reimbursement of expenses or loans, to the executives or business backbone commission and bonuses. In fact, this is a transformation of the nature of income, the risk is very high. In addition to changing the nature of income to avoid paying taxes, there is also the practice of offsetting income through false invoicing. The risk of false invoicing is greater and heavier than tax evasion, and the criminal risk is higher, so we should be vigilant.

(Ⅴ) Strong regulation of equity transfer, timely withholding and payment

According to Article 5 of the Administrative Measures for Individual Income Tax on Income from Equity Transfers (for Trial Implementation), the individual income tax on income from equity transfers shall be payable by the transferor of the equity as the taxpayer, and by the transferee as the withholding and payment obligor. Therefore, the transferee, whether an individual or an enterprise, should be aware of its withholding obligation. According to the provisions of the Tax Collection and Administration Law, if the withholding obligation is not fulfilled, it will face administrative penalties; if the withholding obligor has withheld the collected tax but has not fulfilled the obligation to release it, it will constitute tax evasion. Since the policy of "no penalty for the first offender" does not apply to withholding agents, the risk of both administrative and criminal liability is high. In addition, in practice, the risky operation involving the transfer of equity, such as the concealment of the actual income from the transfer of equity through yin and yang contracts; the transfer of equity at a low price or low price to reduce the income from the transfer of equity, etc., the tax risk of these practices is extremely high.

(Ⅵ) Properly responding to the outbreak of audit procedures

Whether an individual intentionally or unintentionally, he or she may be inspected by the tax authorities for underpayment of tax. At this time, taxpayers should not panic or resist the inspection, but should actively cooperate with the staff of the tax authorities, and if there is indeed a tax leakage or other problems, timely payment of back taxes can avoid administrative penalties and even subsequent criminal risks. In addition, if the taxpayers think that the tax authorities' handling is not appropriate, they should also actively exercise their rights, timely appeal, or file a reconsideration or litigation and other remedial measures after the tax is completed.

Ⅳ. Summary

In recent years, the state has been gradually improving the supervision of personal income tax for natural persons. Not only has it improved the remittance system, clarified the deduction items and standards of individual tax, and given full play to the adjusting ability of the secondary distribution of individual income tax, but also started to publicize and disclose the tax evasion and leakage behaviors of some natural persons, and at the same time, for the industries of equity transfers, equity investment, network entertainment, etc., it has given them special regulation to plug the inadequacies and loopholes in the past regulation, and cleaned up the financial rebates set up by the local governments or the tax authorization policies set up by local governments, which have already achieved good results. With the continuous soundness of tax regulation, the construction of personal income tax compliance is not far away, and only by getting rid of the burden of tax risk can we better carry out our career and enjoy the prosperity of life.