Familiar Beijing Différance in Managing Large Enterprise Corporate Tax Risks and Compliance

“Deconstruction is not a dismantling of the structure of a text, but a demonstration that it has already dismantled itself. Its apparently-solid ground is no rock, but thin air." - J. Hillis Miller

Crucial to deconstructionism is Jacques Derrida's concept of différance. The essence of différance (if you'll allow me to ignore the paradox) is that the "complete meaning is always postponed in language; there is never a moment when meaning is complete and total" because "words and signs can never fully summon forth what they mean, but can only be defined through appeal to additional words" (shamelessly quoted from the above Wikipedia article). A recent article from the BNA Daily Tax Reports shows that the meaning of words in SAT Circulars, Circular (2009) No. 90 in particular, are always ready for a new interpretation.

Circular (2009) No. 90, "China SAT Guide for Large Enterprises to Manage Tax Risks," makes several recommendations for the internal enterprise establishment of tax control mechanisms. The controls range from the comprehensive, for significant tax risks, to the reasonable. And the circular recommends creating tax departments in various areas of an enterprise to manage these controls. The purpose of this circular is to increase compliance with China's tax code, and presumably increase tax revenues. Increasing tax revenues and combating tax evasion are high on a lot of governments priority lists right now in order fund fiscal stimulus packages.

The BNA Report points out that there are two things in this Circular that require a bit of deconstruction: "Large Enterprises;" and "suggests"/"should."

As for the "Large Enterprises" contained in both the title and body of the Circular, this ostensibly refers to the 45 enterprises overseen by the Large Enterprise Administration Department (LEAD). "Ostensibly" because under Chinese there is no limit on the types of enterprises that this Circular is making suggestions to, which includes "all companies, whether foreign or domestic, public or provate, and regardless of their size or legal structure." Eventhough the Circular might apply to foreign SMEs, if it's only a suggestion, it can't have too big of an impact foreign SMEs, right?

If only it were that simple. BNA reports that LEAD posted a memorandum on the SAT website saying that if LEAD companies don't follow the suggestions in the Circular, they'll probably "attract the attention of regional and local tax authorities." So, you don't need to follow the rules, but if you don't follow the rules you will get audited? I think someone wrote a book about this... Something to do with vague bureaucratic excess...

SMEs probably don't need to worry now, but the complete meaning of this law looks like it will be deferred until the future when even a small enterprise will need to implement internal tax controls or at least, as also provided, seek the qualified advice of China tax professionals.