To accelerate the implementation of free trade zone strategy is a major part of the new round of opening up in China. In 2016, the four free trade zones respectively in Shanghai, Guangdong, Tianjin and Fujian contributed RMB 409.055 billion to tax revenues, much higher than the growth of other taxes with the same coverage. The free trade zones that are selected for early and pilot implementation and focused on building the new open economic system are the new drivers for the upgrading and development of China's economy.

Free trade zones highlighted in transformation and upgrading

Tax is the barometer of economic development and a key indicator for assessing the development status of free trade zones. The statistics of the State Administration of Taxation (SAT) show that the four free trade zones feature rapid development, good industry structure, and strong innovation capabilities, playing a radiating and driving role in regional economic development.

Targeting at the modern services industry to build core industry clusters. Industries like finance, foreign trade, shipping and business service play a key part in the overall strategic layout of free trade zones. Relying on the advantage of Shanghai as an international financial hub, China (Shanghai) Pilot Free Trade Zone is dedicated to developing the financial industry, with the industry's contribution to tax revenues accounting for 43.3% of the zone's tax revenues. In China (Guangdong) Pilot Free Trade Zone, the leasing and business service industry covering corporate management, laws, consulting and intellectual property right is vibrant, with the industry's contribution to tax revenues accounting for 23.6% of the zone's tax revenues. Driven by a strong clustering effect, the contributions of the service industries in the four free trade zones to tax revenues account for nearly 90%, 31.4 percentage points higher than the national average.

Developing the high-end manufacturing industry to enhance core competitiveness. The high-end manufacturing with high technical contents in the free trade zones stand out from the sluggish growth in tax revenues from manufacturing in the country. In particular, car making, transport equipment manufacturing like ship building and aeronautics and astronautics, and special equipment manufacturing contribute 44%, 42.8% and 15% of tax revenues on a year-on-year basis, 34, 48 and 15.5 percentage points higher than the national average. The tax revenues from manufacturing in the four free trade zones are up by 33.2% year on year, 33.1 percentage points higher than the national average, showing a remarkable guiding role they have played.

Deepening innovation drive to speed up conversion of new and old drivers. "Internet+" is widely acclaimed as a sunrise industry. In free trade zones, the "Internet+" core industries led by the Internet and relevant services, and software and IT services present a strong momentum for faster development. Last year, the two industries' contribution to tax revenues increased by 65.8% and 53.5% year on year respectively, much higher than the national average. In particular, in China (Guangdong) Pilot Free Trade Zone, the frontier of the reform and opening up in China, the two industries' contribution to tax revenues grew by 4.7 fold and 3.9 fold year on year, by making use of the advantages of Shenzhen in software development. Moreover, featured finance, scientific research and technical services in the free trade zone have become the growth highlights that could not be neglected, and the contributions of the two industries to the tax revenues rose by 66.7% and 37% year on year respectively, indicating the free trade zones' focus on providing support to the real economy and technical innovation.

Expanding reform and opening up in all respects to make good use of domestic and foreign markets. By conducting system innovation, speeding up the reform of foreign capital management system, and optimizing business environment, free trade zones have become key clusters of foreign-invested enterprises. With regard to taxation, the tax revenues from the Macao, Hong Kong and Taiwan-funded enterprises and foreign-invested enterprises account for 37% combined, up by 13.6% year on year, 10.2 percentage points higher than the national average. In particular, China (Guangdong) Pilot Free Trade Zone and China (Fujian) Pilot Free Trade Zone have stepped up efforts to develop the export-oriented economy. In 2016, the contribution of Macao, Hong Kong and Taiwan-funded enterprises in the two free trade zones to tax revenues grew by 90.3% and 100.4% year on year respectively, suggesting they are accelerating the collaboration with Hong Kong, Macau and Taiwan.

Driven by industry optimization, innovation driving and the expansion of opening up, the four free trade zones developed faster than the provinces they are located in 2016, thus becoming the new growth poles of China's economy.

The early and pilot implementation policy carried out to make full use of the radiating and spillover effects

According to the overall plan for free trade zones, the mission of free trade zones is to "explore new paths and accumulate new experiences for comprehensively deepening reform and expanding opening up", which is of great strategic significance to the country.

In order to attract investments through tax incentives, significant efforts have been made to expand exchanges of commodities and labor in the free trade zones, boost trade development and make innovation in the tax system:

- For the gains from the transfer of non-monetary assets confirmed by asset reorganization behaviors such as outbound investments with non-monetary assets and the gains from stock incentives, corporate income tax and personal income tax shall be paid in installments in 5 years;

- The ship of "flag of convenience" policy has been adopted, allowing China-funded international ocean ships to go through tax-free registration procedures, and exempting them from paying tariffs and VAT for the import link;

- The departure port tax refund policy has been introduced, allowing taxpayers to declare and apply for a tax refund at the port of departure for exports shipped from the port of departure and departed from Shanghai Yangshan Port.

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The adoption and improvement of tax policies has relieved the capital pressure on enterprises and enhanced confidence in development. The preferential policy of installment payments of income tax in free trade zones could effectively reduce the capital pressure on enterprises, says Shi Hailei, a lawyer at Beijing Yuecheng Law Firm, who has long been committed to corporate tax research. "The adoption of special regulatory policies and preferential tax treatment in free trade zones can greatly boost the entrepot trade and offshore trade in a country, and therefore, the foreign exchange policies and tax policies should be further liberalized in the future," says an official from Pudong Academy of Development & Reform.

The early and pilot implementation policy adopted in free trade zones, the new highlands for China's opening up, is gradually spilled over to other areas: the export tax refund policy for financial leasing that is piloted in Tianjin Dongjiang Bonded Area is being rolled out nationwide; the departure port tax refund policy has been expanded to 8 ports of departure; the departure tax refund policy for overseas tourists are being rolled out nationwide…

The system innovation and economic growth in free trade zones are playing a radiating and driving role. "In China (Shanghai) Pilot Free Trade Zone, for example, the system spillovers are shown in the fact that many supervisors at special Customs supervision areas visit and learn from the free trade zones, and the industrial spillovers are indicated in the fact that registered enterprises in the free trade zones are expanding into neighboring provinces and cities." According to Zhao Xiaolei, director of the Institute of Free Trade Zone of SUFE, the reform and innovation in the free trade zones provide strong impetus to the economic development of neighboring regions and serve as a reference for the new round of reform and opening up.

Innovation measures rolled out to a wider range of areas to provide more convenient taxation services

As the test areas of the new round of reform and opening up in China, free trade zones are the highlands and experimental areas of systems, policies and measures, dedicated to providing experiences that could be reproduced and rolled out to the country as a whole. What innovative taxation services could enterprises in the free trade zones access?

Since 2014, to support the building of free trade zones, the SAT has launched two batches of 20 innovative services measures, collectively known as "one-stop online tax processing 10+10". By deepening the administrative approval system reform, "Internet + tax", and cooperation between state and local tax authorities, the SAT has greatly enhanced the easiness of taxation and sense of gain among taxpayers. In particular, the four tax matters involved in the tax reform, namely, online approval and filing, automatic online coding, automatic online tax processing and online credit rating, have been reproduced and rolled out across the country.

The tax authorities governing the four free trade zones have established the simplest philosophy, and deepened integration and innovation, making greater strides in accelerating the reform of management models, innovating systems and mechanisms, and optimizing processes.

The Guangzhou Nansha Development Zone Local Tax Bureau was the first to launch "discretionary tax return filing" across the country, and take bold steps to eliminate "zero tax return filing", allowing taxpayers to discretionarily file tax returns when their obligation to make tax payments is generated, thus building a new tax management model in the free trade zones. This policy exempts nearly 10,000 taxpayers from "zero tax return filing", thus tremendously reducing the burdens on taxpayers.

Tianjin Municipal Office, SAT is carrying out a pilot program of one-day handling of "one certificate, one code, one seal and one invoice" in the free trade zone, shortening the time spent on approving new taxpayers from the previous 9 working days to 1 working day. Moreover, the comprehensive tax processing model of "one window, one person, one computer and double system" has been built to achieve mutual allocation of the privileges of the systems of state and local tax authorities, business integration and process standardization.

The ongoing effort to build smart taxation also provides a strong boost to the development of free trade zones. Regional tax authorities are active in the in-depth combination of innovative fruits of the Internet and taxation, and promoting online and offline integration to help enterprises in the free trade zones to enhance the quality of tax processing.

Lenovo (Shanghai) Electronics Technology Co., Ltd, one of the first enterprises to carry out the pilot program of electronic invoices, strongly feels the eagerness of tax authorities for innovation. "Since the electronic invoices were launched, we can save costs of RMB 7.5 million every year," says Li Xiaojun, senior taxation manager of the company.

The Guangzhou Nansha Development Zone Office, SAT is focused on building full-function electronic taxation bureaus. The Office has processed more than 200 tax matters online and realized online processing of common tax matters, reducing the visits of taxpayers by 75% throughout the year and the paper submissions by 80%. In Xiamen Free Trade Zone, more than 98% of tax-related documents approval among local taxpayers can be processed online end to end, thus achieving paperless tax processing end to end.

The paperless tax processing measures highly acclaimed by taxpayers have been reproduced and rolled out to a wider range of areas. In Pudong New Area, for example, nearly RMB 26 billion in tax was refunded or exempted through paperless tax refunding throughout last year, with the time spent on processing shortened by 30%, and 3.5 million copies of paper invoices and statements could be reduced every year.

The online service for non-trade foreign exchange payment provided by tax authorities are widely recognized by enterprises in the free trade zone. According to Zhang Yun, tax official from Danfoss Automatic Controls Management (Shanghai) Co., Ltd., the innovative non-trade foreign exchange payment management model helps reduce the procedures of and time spent on foreign exchange payment, and transform and upgrade the Shanghai financial center to Chinese settlement center, thereby reducing the operating costs and ramping up management efficiency. This approach is being reproduced and rolled out to the enterprises outside the free trade zone.

In the free trade zones, the windows of China' reform and opening up, taxation services to Hong Kong, Macao and Taiwan-funded enterprises and foreign-funded enterprises are of vital importance as well.

In Xiamen, lying across the strait from Taiwan, state and local tax authorities of Xiangyu Bonded Area jointly hold special seminars on tax policies on a regular basis to elaborate on relevant tax policies and provide onsite consulting to Taiwan-funded enterprises.

The state and local tax authorities in Hengqin New Area, Zhuhai, provide prior intervention services with regard to tax policy services, offering barrier-free and personalized tax processing consulting and tax-related appointment services in multiple languages such as Cantonese, English, Portuguese and Chinese Mandarin, and jointly promote mutual recognition of "prior agreement" between state and local tax authorities, thereby further reducing tax-related risks and enhancing confidence among investors. Hong Kong Jinzhuan Weishi Capital Holdings Co., Ltd. concluded a prior agreement with the tax authority on non-resident partners' payment of taxes, and decided to register in Hengqin Free Trade Zone in the month.

Under national key strategies like the Belt and Road Initiative, taxation could help free trade zones to develop, and further align China's economy with the world economy to build closer economic and industrial linkage and test the waters for further reform and opening up.