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CIRCULAR OF THE STATE COUNCIL ON CONCERNING STRICT CONTROL OF THE REDUCTION OF AND EXEMPTION FROM IMPORT TAXATION

    The policy of the Central Party Committee and the State
Council on strengthening the macro-control demands that the
departments of taxation affairs at all levels should administer the
taxation according to law, strengthen the levy of taxation, stop up loopholes
of tax reduction and exemption, reinforce and perfect the macro-control,
thus to insure the state revenue. Accordingly, the State Council and its
relevant departments have already ceased to approve all temporary reduction of
or exemption from custom duty, import-related value-added tax and
consumption tax (hereinafter referred to as "import-related tax"), and
clarified all the regulations on reduction of and exemption from custom duty
and import-related tax. But, since this year, there are still
many localities and units applying to the State Council and relevant
departments for approval of custom duty and import-related tax reduction and
exemption. In order to exercise stricter control of the reduction of or
exemption from custom duty and import-related tax, strengthen the
imposition and administration of taxation, bring into play the role of the
taxation as a means of regulating the state economy, insure the smooth
reform of the state financial and taxation system, this Circular is to
articulate on the relevant issues as following:

    1. The custom duty and import-related tax belong to the
central government, which is one of the important means to regulate
the state macro-economy, and also one of the important sources of
central government's revenue. No organizations, localities,
units, or individuals shall have power to determine reduction of or
exemption from these kinds of taxes.

    2. No localities or departments shall be permitted to apply to the State
Council or relevant departments for approval of the reduction of and exemption
from custom duty or import-related tax. From now on the State Council and its
relevant departments shall not accept or approve such kind of application.
Localities or departments should mainly rely on its own resources to overcome
its own difficulties. With regard to the difficulties of those poor areas and
special difficulties resulting from serious natural disasters, as a principle
they should be solved by self-rescue through production or financial
allowances at their own levels.

    3. The Committee on Custom Duty Regulation under the State Council,
the Ministry of Finance and the General Bureau of Taxation Affairs
shall continue to clarify the current regulations on reduction of and
exemption from the custom duty and import-related tax, and shall submit to
the State Council a detailed list of items one by one, and with its
decision on it attached. Those regulations on tax reduction and exemption
that are in compliance with international practice and demands of building
up of socialist market economy, shall be remained effective and
promulgated to the public after revision and rearrangement. Those few
existing tax reductions and exemptions based on regulations for consideration
of industrial policy and other special needs shall only be effective within
the term stipulated or the quotas specified. Once the term expires or the
quotas run out, they shall all be terminated. The term shall not be extended
and the quotas shall not be increased. Except the above situations, all
other tax reduction and exemption regulations shall be cleared up and
annulled in groups before the end of 1995.

    4. Custom duty and import-related taxes are one of the important means
to regulate the state's macro-economy, and the policy of uniform,
standardization, equality and openness should be implemented in this regard.
The state government shall readjust the rate of custom duty and
import-related taxes from time to time to satisfy the needs of industrial
development, macro-control of economy and the expansion of economic exchanges
with foreign countries. All localities and departments may forward their
suggestions on the tax structure and tax rate to the Committee of Custom
Duty Regulation under the State Council (its office is established in
the State Economy and Trade Commission), the Ministry of Finance and
the General Bureau of Taxation Affairs. After joint discussion, the
above three departments shall submit their opinion to the State Council for a
decision.

    5. The Customs and the departments of taxation affairs should take
concrete measures to strengthen the administration of taxation and strictly
implement all regulations on taxation. All localities and departments should
take over-all interest of state as its aim, protect the sanctity of tax
statutes and regulations, and assist the work of taxation. Any violation of
the tax law, any expansion of tax reduction and exemption without
authorization shall be punished seriously.