China’s tax bureau details social credit repair procedures for tax violations

The faster a company repairs their social credit tax records after a violation, the more complete the repair will be.
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What is Social Credit: Social Credit System: Tax

The State Taxation Administration has released the details of its credit rectification scheme. The new rules outline a point deduction and addition system designed to encourage taxpayers to respond quickly to poor records.

Some context: Taxpayers are graded on a letter-based scale from A-D. Letter grades are attached to a point system.

Key takeaway from the new regs: the faster a company repairs their social credit tax records after a violation, the more complete the repair will be.

For example, tax authorities will:

  • Deduct 3 points from tax credit grades for failing to file financial statements on time
  • Add back 2.4 points if the problem is rectified within 30 days
  • Add back 1.2 points if rectified after 30 days, but before the end of the current year
  • Add back 0.6 points if rectified after 30 days, and before end of the following year

The big picture: Social credit policies are all about getting companies to regulate themselves, and to repair violations of their own volition. Creating a timed model for rectification falls right in line with that objective.

The backstory: China’s tax bureau was dishing out compliance grades to corporate taxpayers well before social credit system came along, but tax payments records and gradings have since been rolled into the larger social credit framework.

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