(Yicai) June 24 -- China has introduced new regulations that clarify the tax reporting obligations of internet platform operators as the country ramps up efforts to tighten oversight of the fast-growing online economy and curb illegal activities such as tax evasion and the concealment of income by vendors and platform workers.

Online platforms must submit the identity details and income data of all merchants and employees within one month after the end of each quarter to the relevant tax authorities, according to a policy document released by the country’s cabinet, the State Council, yesterday.

Internet platform operators are due to submit their first report in October this year, a representative from the State Taxation Administration said. The tax authorities are stepping up efforts to formulate specific tax reporting rules and will engage with internet platforms to provide policy interpretation and training support, he added.

If platforms fail to submit their tax reports on time, or if they provide false or incomplete information, they will be ordered by the tax authorities to rectify the issue. If they fail to comply, they could face fines ranging from CNY20,000 (USD2,800) to CNY100,000. In serious cases, companies might be forced to suspend operations and face even higher fines of up to CNY500,000 (USD70,000).

The new rules will not increase the tax burden for most vendors or gig workers, the person said. However, those who have been underreporting their income will now have to pay the proper amount of tax.

The policy also includes tax breaks for micro, small and medium-sized businesses as well as low-income workers. Merchants with a monthly turnover of less than CNY100,000 (USD14,000) are exempt from paying value-added tax and individual gig workers earning less than CNY120,000 (USD16,700) a year will not be required to pay personal income tax.

To ease the burden on platform operators, the new regulations state that they do not need to report the income of people engaged to perform basic services such as delivery, transport and cleaning.

The internet platform economy now makes up a sizable portion of China’s gross domestic product, so better tax oversight is essential to maintaining fairness in the system, fiscal policy expert Wang Weiqing told Yicai.

The new rules are a milestone in the governance of China’s digital economy, Wang said. They clarify the compliance obligations of platform operators, reduce the room for tax avoidance by vendors and employees of the platform, narrow the tax gap between the real and digital economies and create a more level playing field for all.

Editor: Kim Taylor