Download pdf - China Free Trade Zones discussion paper: Regulating a Free Trade Zone – Simplifying data collection and improving transparency

Regulating a FRee tRade Zone – SimpliFying data collection and

impRoving tRanSpaRencySeptemBeR 2014

China Free Trade Zones disCussion paper

contentS

1. executive Summary 4

2. introduction: the role of free trade zones 5

3. the role of corporate data collection and transparency 6

4. data collection, sharing and transparency in china: practice and pilot developments 8

5. the uK approach to corporate data and transparency 11

6. corporate information collection and transparency in the united States of america 14

7. corporate reporting in canada 15

8. Successful data collection, utilisation and transparency 16

9. conclusion: Benefits and discussion points 18

Regulating a FRee tRade Zone – SimpliFying data collection and impRoving tRanSpaRency | 2014

3FoRewoRd

FoRewoRd

i am honoured to chair the international experts consultation group which has been established to assist chinese policymakers in their key task of developing Free trade Zones. the group brings together experienced practitioners from a wide variety of backgrounds and nationalities. it provides an extensive knowledge bank which china can use and adapt as the Free trade Zones evolve.

this discussion paper is one of a series that is being produced in response to specific requests from chinese policymakers. we hope that it will provide practical support to the development of the Free trade Zones policy to the benefit of china and its people. Successful Free trade Zones will be an important catalyst for economic reform and will greatly enhance international trade and investment flows. this will have a direct and positive impact on increasing global prosperity.

i am very grateful to those who have contributed their insights to this paper and who have given their time so generously to the work of our group. we look forward to discussing it in detail and to participating in an ongoing dialogue with chinese experts in future seminars and workshops.

Sir gerry grimstone chairman, thecityuK

2014 | Regulating a FRee tRade Zone – SimpliFying data collection and impRoving tRanSpaRency

4 1. executive SummaRy

1 executive SummaRy

this paper looks at developments in corporate data collection and transparency in the china (Shanghai) Free trade pilot Zone (Shanghai FtZ) and current practices in the united Kingdom, the uSa and canada, based on the work of grant thornton’s network of china Services groups across the world.

it is designed to provide insight into international practices, consideration of the benefits of a well-balanced policy in this regard, and a basis for discussion regarding future developments in data collection, utilisation and transparency within free trade zones across china, and in turn, the possibility of expanding these measures nationwide.

The benefitsFree trade zones are designed to help drive the economy, attract investors, streamline government regulation, promote administrative reform, and test and devise a path for further economic development. Refining data collection and transparency are relatively straight-forward ways of furthering all these aims. a good data collection and utilisation system increases efficiency and productivity, improves competitiveness, fosters innovation and encourages investment. in addition, the right balance of transparency within a robust data policy, improves policy formulation, informs decision making, advances understanding of business partners and counterparties, and reduces risk, while also protecting sensitivities and commercial secrets as appropriate.

Good policya good policy is transparent in itself, and published data policies clarify what is expected of both the companies providing information, and the departments utilising it. this also helps policy makers to identify exactly what information they really require, why this is required

and how it will be used. in turn, this helps ensure that unnecessary time is not wasted gathering and processing data that is not needed.

a lighter touch approach to data collection is a theme of developed markets. this includes clear regular reporting requirements, which allows businesses to plan and to devise systems to generate the necessary information. it also includes more of an emphasis on filing after the event, rather than before a transaction, allowing companies to react more quickly to business opportunities.

information technology is playing an increasingly important role in both the collection and processing of data. online ‘one-stop’ platforms help to simplify the reporting process. this is combined with standardisation and harmonisation, which increases familiarity with systems, reduces the need to file similar data multiple times to different agencies, and assists with the sharing of data between government departments.

The free trade zone opportunitythe question of when to collect data, what to collect, and how much, is a fine balance. Free trade zones across china provide an excellent opportunity for piloting more streamlined platforms and practices, and to tweak levels of transparency to find the most suitable solution for china’s circumstances. the Shanghai FtZ has already begun the transition to a more efficient system, and many of the elements of a good corporate data policy are contained within the new platform being implemented in Shanghai. this paper presents an overview of these developments, and the systems in the uK, uSa and canada for comparison and further debate.


52. intRoduction: the Role oF FRee tRade ZoneS

china stands at a cross roads. having enjoyed substantial and prolonged growth and economic development since opening up its economy over the past three decades, further reforms are now needed to continue on this trajectory. Such structural adjustments will undoubtedly bring risks as well as opportunities.

the chinese government is looking to manage these risks through piloting new policies on a local level before national implementation. these experiments are being spearheaded through the use of free trade zones, and in particular the Shanghai FtZ, which was described by commerce minister gao hucheng at the opening ceremony as “an experimental field to conduct economic reform”. it is clear that free trade zones will develop reforms that can, and will, be applied more widely if they are successful. this provides the opportunity to test some important new policies in a more controllable environment, reducing risks, before selecting the best and most applicable reforms for the rest of the country, “crossing the river by feeling for stones” in the famous words of deng xiaoping.

the free trade zones are designed to encourage innovation, promote international trade, attract investment, and diversify and up-skill the economy. the reforms being introduced to achieve this encompass supply-side liberalisation, regulatory reform and financial experimentation.

market access is being improved for foreign invested enterprises (Fie), removing and decreasing restrictions in some sectors and making it easier to establish companies and operate. For example, financial services has been identified as a key sector for the region, and the Shanghai FtZ is easing limitations on the activities of international banks and financial institutions, as well as developing a range of international commodities exchanges.

there will also be a raft of financial reforms over the three year period demarcated for the Shanghai FtZ. this will include experimentation with the convertibility

and cross-border use of the RmB, and the people’s Bank of china is already allowing companies registered in the FtZ to open special bank accounts and to convert RmB and transfer capital overseas more freely. outbound investment, particularly in foreign securities, will also be easier for individuals within the zone. in addition, there are moves towards a greater role for market forces (rather than regulators) in setting interest rates.

piloting regulatory reform will be another pillar of the Shanghai FtZ, and the authorities have expressed a desire to establish an administrative environment and system that is in line with international practices, and a management system which fits with international trade and investment standards, as well as enhancing cooperation among authorities and implementing tax policies which serve to promote trade.

this clearly requires the further development of data collection and usage systems. Reforms have already begun in this area, with new systems such as an online filing platform, the move towards a ‘negative list’, and changes to allow some goods into the FtZ before completing the customs declaration formalities all being positive steps.

the move by the chinese government to boost growth by reform rather than stimulus has received wide spread acclaim from the international investment community, and such developments are undoubtedly important for the future of the free trade zones, and the wider chinese economy. however, it is imperative to strike the right balance between liberalisation and decreasing red tape, but still managing risk. making investment easier for companies is to be welcomed, but it is also vital to ensure compliance with local laws and regulations and encourage socially responsible corporate behaviour, as well as the protection of the chinese economy and the maintenance of a robust regulatory system. a positive policy for corporate data collection and management will help find this balance.

2 intRoduction: the Role oF FRee tRade ZoneS


6 3. the Role oF coRpoRate data collection and tRanSpaRency

we understand that the aims of the Shanghai FtZ are to explore new models for liberalising the economy, streamlining government regulation, promoting administrative reform and providing a path for further economic development. the approach to data collection and transparency are critical to achieving this.

governments naturally need to collect data from companies that operate within their borders. this has many uses including regulation, taxation, monitoring, planning, public policy, control, and risk management to name but a few. the starting point for much government work is to look at the relevant available data, so having the right type of source material, of the right quality, is imperative.

the use of data is becoming increasingly sophisticated as technology allows it to be used in larger volumes and in different ways, and the utilisation of ‘big data’ is becoming influential, and yielding better informed decision making. this information is being used by governments and businesses in new and innovative ways to improve all kinds of activities, from identifying tax evasion to public health and transport planning.

Transparencytransparency is also aiding this process, as open source and open access data means different government departments can utilise and understand more information, as well as allowing the private sector to exploit it for the benefit of the economy.

access to specific information about companies can help investors, consumers, partners, financial institutions, and many others, to make informed decisions about them, and the ways to interact with them. however, an important line must be drawn in terms of ensuring that commercially sensitive information is protected, and unregistered intellectual property and trade secrets are not threatened.

as well as the public availability of the data itself, a transparent data policy, published by relevant government departments, is important so that those affected know what data is required from them for different bodies, why it is needed, and by when.

3 the Role oF coRpoRate data collection and tRanSpaRency


73. the Role oF coRpoRate data collection and tRanSpaRency

The compliance burdenmore, and better, data, used in an increasingly productive and sophisticated manner, can clearly be an extremely positive force for economic and social development. however, while there is a temptation to collect an ever increasing volume of data, this needs to be balanced with the burden it places on those required to provide it, the risk of unnecessary information being requested and processed, and the danger that sensitive data could be misused.

For companies, the effect of this primarily comes in the form of their compliance requirements, the regular information they have to file to comply with relevant laws and regulations. a heavier compliance burden means increased costs, less management time to focus on growth, and reduced efficiency. this means less wealth is created, less value is added and less people are ultimately employed.

corporate data helps the government to manage risk, ensure laws are followed, and understand business trends, so reporting is a vital part of a healthy economy. however, a fine balance needs to be found to ensure that compliance achieves its goals, but does not overburden the economic actors.

encouraging investmentRed tape can skew corporate behaviour, and influence investment decisions. in the world Bank’s annual ‘doing Business’ survey, 17 of the top 20 countries for ease of doing business are also high income economies. most of these are open economies which enjoy a large amount of foreign investment, creating wealth and employment for the population, highlighting the link between an attractive regulatory regime and investment decisions by corporations.

Research from bodies such as the china-Britain Business council and the european chamber of commerce in china, suggest that bureaucracy is a major barrier to growth for international companies in china, deterring investment. it goes without saying that international investors like to operate in environments which are similar to the international norms to which they are accustomed. as such, the sort of lighter touch approach to compliance seen in many developed economies can help to attract such investment, which in turn can bring benefits including more employment, technology, skills, and wealth.

the most simple way of reducing bureaucracy and the compliance burden, without significantly increasing risk, is to maximise the simplicity and efficiency of data collection, and to only collect data that has a clear purpose. online portals and data sharing platforms have an important role to play in this process. the Shanghai FtZ is clearly beginning to move in this direction.


8 4. data collection, ShaRing and tRanSpaRency in china: pRactice and pilot developmentS

Company formationoverseas companies setting up businesses in china have, for years, had to submit a wide variety of documents to several different government departments; as such company formation has been a lengthy process and it can often take over 3 months, and even longer in some circumstances, before a new Fie is operational. this dramatically slows down the speed at which companies can react to opportunities, and disrupts business plans, deterring investment.

typically, setting up a wholly foreign owned enterprise in china requires separate registration with the State administration of industry and commerce, the ministry of commerce, the Bureau of Quality and technical Supervision, the Statistics Bureau, State and local tax Bureaux, and the State administration of Foreign exchange. however, the pilot free trade zones across china give the opportunity to streamline this process.

the company set-up process in the Shanghai FtZ is being simplified, and a ‘one-window, one-stop’ online platform was launched on 10 october 2013 to help expedite the necessary registration procedures for Fie. this system allows a company to be formed in approximately 10 days, dramatically reducing the time required to start a business in china.

the platform is expected to be developed further to make company formation increasingly simple for international investors, and this is an extremely welcome step to address one of the most burdensome issues for overseas companies looking at commencing business operations with china. in addition, further functionality is being developed for this system for new users, and new processes.

the use of this platform ties into the introduction of the ‘negative list’ in Shanghai FtZ. this pilot policy has the potential to be extremely influential as it transitions from the practice in the rest of the mainland of relying on a list of permitted activities for international companies, to instead introducing a list of 18 industries in which activities are restricted. on top of the registration which can be undertaken through the online platform,

investments on this negative list will still be subjected to additional application and registration requirements. So while the set up process for businesses not on the list has been simplified, those operating in the 18 industries on the list will still face a number of extra restrictions, including rules regarding registered capital, equity ratios, business performance requirements, and the business scope that is permissible as per the business licence.

this platform also helps the authorities to collect first hand data from newly registered companies in a straight-forward and transparent way, without the need for multiple filings by the business. this information includes the holding company, registered capital, company address, business scope and details of senior management. the move to share this data appropriately between government departments, reducing the need for reporting the same information several times, is very welcome. consideration could also be given to using the same platform for generating up-to-date publicly available corporate data, providing any sensitive information is not disclosed.

annual reporting and public disclosurea major compliance requirement in china, for both foreign-invested and domestic-invested companies, is the annual inspection. this involves several chinese government authorities and requires the preparation and submission of various documents including an annual audit report.

this practice is beginning to change, and not just in the free trade zones. Shanghai began to roll out an online annual reporting mechanism in 2014, which is designed to replace the requirement for an annual on-site inspection. however, the implementation of this new practice varies for each administrative district, and some districts within Shanghai still require the submission of documents to the authorities on-site.

on 13 march 2014, trial measures were introduced that effectively mean that all companies in the Shanghai FtZ need only provide the annual online report, without the need for on-site document submission, and also some of this data is to be publicly available for the first time.

4 data collection, ShaRing and tRanSpaRency in china: pRactice and pilot developmentS


94. data collection, ShaRing and tRanSpaRency in china: pRactice and pilot developmentS

the online system allows companies in the Shanghai FtZ to use their electronic identity authentication to submit their annual report to the administration of industry and commerce. this is done by logging onto the enterprise credit and information disclosure System, contained within Shanghai administration of industry and commerce’s web portal. online filing is required between 1 march to 30 June each year and, after submission, the relevant information will be disclosed to the public. this will provide a major increase the levels of transparency of corporate data, as every entity and individual will potentially have online access to this annual company information through the enterprise credit information disclosure System.

legal entities will need to submit information in their annual reports including their business address, registered business scope, any changes to the company’s articles of association, changes of senior management, paid-up and registered capital, assets, operational status, number of employees and contact information. in addition, annual audit reports, issued by a licensed accounting firm, shall be required for many businesses, including listed companies, wholly state-owned and state-owned holding companies, companies with subscribed registered capital over RmB 20million, companies with annual turnover of over RmB 20million, and enterprises engaging in certain financial services activities.

companies that fail to upload their annual report within the designated period, or cannot be reached via their business premises, shall be recorded through the enterprise credit and information disclosure System on a ‘black list’, which will be available to the public.

the introduction of online annual reporting and the associated public disclosure system in the Shanghai FtZ will greatly assist companies in the region with their compliance burden, freeing them up to focus more on their core business. public disclosures should also help manage risk and allow economic actors to better understand the background of the parties they transact with. we hope to see these reforms continued and expanded, and these developments clearly demonstrate the chinese government’s positive intention to

further transform the corporate reporting process, and to promote increasing levels of transparency for appropriate corporate information.

Tax data and reportingthe State administration of taxation has recently released a notice that promises to support a range of innovative tax services within the Shanghai FtZ. the notice (Shui Zong han [2014] no.298), introduces ten tax-related services as a step to move the administration of taxation online, an important step in simplifying data collection, and one that will also allow more efficient analysis by the relevant government departments.

the ten online services are: the generation of tax registration numbers, self-service tax filing, electronic invoicing, cross-regional tax services for the Shanghai FtZ, general vat taxpayer applications, administration of non-resident taxation, record filing, quarterly return filing, tax payment credit evaluation and a stated aim to develop further innovative online services for the zone. Following the successful implementation of these somewhat ground-breaking reforms in the Shanghai FtZ, the State administration of taxation has indicated an interest in further reform and simplification of the administration of the entire taxation system.

while in the past taxpayers have been required to visit the tax bureau for the registration of a variety of documents, and to seek approval from relevant government departments before the related transactions, there is a move within Shanghai FtZ towards ‘post administration’ – shifting supervision and approvals to later in the process. this has the potential to reduce many of the delays associated with the approval process seen in other regions, improving the efficiency of administration for the government, and saving time and cost for companies in Shanghai FtZ.

these online tax services are allowing enterprises to handle an increasing number of issues from their own offices, reducing the staff time needed for compliance, and helping to reduce administration costs.

among the additional improved services that are being provided to companies in the Shanghai FtZ, the administrative burden of tax compliance is also


10 4. data collection, ShaRing and tRanSpaRency in china: pRactice and pilot developmentS

being reduced through better sharing of data between government departments. For example, information sharing between the Science and technology commission, the Shanghai administration of industry and commence, and the Bureau of Quality and technical Supervision has simplified the procedures for approving tax deductions for research and development expenses and non-trade payments.

Customs informationFor china’s free trade zones to live up to their names, perhaps the greatest reforms are needed with regard to customs. the Shanghai FtZ has been experimenting in this area with an innovative customs supervision information system, which came into effect on 30 June 2014. this includes an extensive streamlining of the customs system, reducing some of the documentation required, standardising declaration procedures, and automating certain clearance checkpoints.

the new system includes a move towards ‘declaration-after-entry’, whereby eligible enterprises are now allowed to bring goods into the zone by presenting the manifests and then completing the declaration within 14 days.

the payment of duties is being revolutionised as well, moving away from making sure payments have been made before they are cleared to ensuring compliance through auditing, allowing enterprises to pay the relevant taxes centrally within a prescribed period after the imports and exports have been released. an additional reform allows qualifying enterprises, with effective guarantees, to move some bonded goods inside and outside the Shanghai FtZ for exhibition, only paying taxes after any sale.

these moves will be invaluable for exporters and importers, reducing the scope for delays, as well as cutting the time and cost of dealing with customs clearance.

Future plans to build a comprehensive data collection and supervisory platform within the shanghai FTZthe Shanghai FtZ authorities are planning to take these reforms further by establishing an integrated information sharing platform that will connect a wide variety of authorities which have a bearing on enterprises in the zone, including the administration of industry and commence, the Bureau of Quality and technical Supervision, customs, the tax Bureau, and the administration of Foreign exchange. this platform will allow the authorities to establish a database to record operational information for the companies registered within the pilot zone, and will help combine a range of functions currently operated across departments, such as registration and administrative management, daily supervision, emergency management and credit ratings. in addition, the intention is to devise a clear mechanism for information sharing between government agencies and clarify the responsibilities of each authority for the purposes of information collection, processing, transmission, application and feedback to further improve the platform as it develops.

along with this integrated platform, the authorities will also develop a system to disclose appropriate information to the public. Such transparency will help to both advocate and ensure compliance, and will also be a valuable tool for further evaluations of corporate credibility by individual users.

the changes highlighted above clearly demonstrate the commitment of the Shanghai FtZ to improve the approach to data collection, and the usage of that data, and further reform will broaden and deepen the impact of this system. once the system’s robustness is adequately tested, this should prove a basis for expansion to further pilot zones, and eventually to the rest of china, so the whole economy can benefit from the advantages these improvements will bring.


115. the uK appRoach to coRpoRate data and tRanSpaRency

5 the uK appRoach to coRpoRate data and tRanSpaRency

the key body in the uK for corporate data collection is companies house, which is the national register of companies. companies house, which falls under the department of Business innovation and Skills, is responsible for the registration and provision of company information. in particular, its stated main functions are to: incorporate and dissolve limited companies; examine and store company information delivered under the companies act and related legislation; and, make this information available to the public.

as well as registering the formation or closure of a company, there is also a requirement for uK companies to file an annual return and also annual accounts with companies house. in addition to this, changes to information such as directors or the registered address should be made as they occur.

companies house sees the key elements of an efficient service as providing up to date information promptly and accurately, keeping the costs of compliance to a minimum, keeping down their own costs and continually looking for ways to make it easier for customers to send and receive data. companies house has used the internet and information technology to provide a platform for an increasing range of its services, and now most information can be filed, and accessed, online.

incorporationcompanies house offers an online incorporation application service, whereby information can be submitted to their web portal, and if the application is accepted, an email is received within approximately 2 days that confirms the company number and company name, and provides an electronic version of the certificate of incorporation and memorandum of association. combined with the uK’s relatively relaxed rules on company formation, this has made it easy for domestic, and foreign, companies to register their businesses and start trading in Britain.

annual compliancecompanies should file an annual return and annual accounts with companies house. the annual

return provides a snapshot of a company’s general information, such as its principal business activities, directors, secretaries, registered office address, shareholders and share capital. annual accounts are prepared according to uK gaap or iFRS. these can be filed online through the companies house web portal. to do this, a company must simply register for a password, which is linked to an email address, and an authentication code, which is posted to their registered office.

event driven filingSome information must be reported when particular changes occur within a company, such as the appointment of a new director, or a change to share capital. this information needs to be filed with companies house so they can update the public record. the companies house web filing service also allows these changes to be updated online. this saves costs, and increases the speed and efficiency with which this information can be used and made publicly available, so users can get an up-to-date picture of the company.

The public availability of recordsthe open access of this information means that companies house data is utilised by a huge number of different parties, including government departments, academics, and private companies, and is used to both better understand the background of specific companies, and for wider statistics about uK business. this transparency also means that the data can be used in a variety of innovative and productive ways. as an example, companies house data forms the basis of the touying tracker, an annual public piece of research produced by grant thornton uK llp in conjunction with the china daily which analyses the fastest growing chinese companies in Britain. this showed that the top 25 uK subsidiaries of chinese companies had combined revenues of over £17 billion in 2012, and employed more than 2,600 people.

Tax data, compliance and filingher majesty’s Revenue and customs (hmRc) is responsible for taxation in the uK, including customs


12 5. the uK appRoach to coRpoRate data and tRanSpaRency

duties. in general, uK companies have to file distinct information for each different type of tax that they are subject to. For corporation tax, the key information is an annual tax return and computation. the computation, which is prepared by the company or their agent, discloses a breakdown of the annual accounts, the expenditure incurred and the various tax adjustments necessary to calculate the company’s tax charge for the period. Separate information must be filed for other taxes, such as regular vat returns (often every three months) and specific documentation for payroll and employee taxes.

in general terms, almost all compliance documentation is required after transactions occur, rather than beforehand. this allows companies and individuals to react more quickly to economic opportunities, but still ensures that they comply with relevant regulations.

almost all tax information is now filed electronically in the uK. commercially available tax software can generate electronic computations and returns that are compatible with hmRc’s systems, and these can be filed through the hmRc web portal.

in addition, annual accounts (the same as those filed with companies house) must be electronically tagged for submission to hmRc. this allows smart software to then analyse accounts and computations to assist tax inspectors in identifying irregularities.

Transparency and availability of dataSpecific individual and corporate tax data remains confidential. although, there have recently been some political moves to make certain information more publicly available to address tax evasion and avoidance. however, in addition to administering the uK’s tax system, hmRc is one of the country’s largest providers of statistics, publicly releasing over 100 different statistical products based on the data they receive to help politicians, academics, companies and individuals better understand the uK’s economic and social environment.

uK Customs data and Trade statistics the major data collection tool for customs and trade information in the uK is chieF (customs handling of

import and export Freight), a computerised system that helps the uK authorities through three key functions: the collection of revenue; the accurate collection of international trade and transport statistics; and risk assessments to identify which goods to physically examine.

chieF allows customs entries to be completed electronically, allowing quicker clearance (for goods considered low risk) when they are imported from non-eu countries or exported from the uK. the system also helps to validate the accuracy of data, advising the processor of any errors or necessary documentary requirements. For imports it calculates the duties and taxes incurred by individual importers.

Five independent trade systems connect with chieF, enabling traders to record and track the movement of goods within controlled border points, so they can operate more efficiently and ultimately helping to facilitate trade between businesses.

chieF is also used to feed data to intrastat, the system that collects statistics on the trade in goods within the european union. changes to european union legislation under the union customs code means the chieF system will be unable to accommodate new legislative requirements, and accordingly hmRc have introduced a replacement programme that is due to be fully implemented by 2020.

Customs data transparencyunder the Finance act of 1988, the uK trade statistics unit are able to disclose information on imported goods and make this available to other persons. the importer details database provides access to the names of businesses importing to the uK from outside the european union. however, this information will only list the business name and address, and the commodity code imported by month. hmRc also make ‘management Support System’ data available to businesses through four standard reports covering import, entry, tax and export item data. hmRc can supply information such as the entry date, commodity code, customs procedure code, value of goods, origin, value for customs purposes, value for import vat, tax


135. the uK appRoach to coRpoRate data and tRanSpaRency

paid as well as a range of other items of data. however there is a limit on the release of data, and information cannot be released to traders if it may compromise hmRc’s control activities.

Trade statisticsoverseas trade statistics are collated from trade declarations made using commodity codes (the numeric system designed to identify specific products). Businesses must provide details of the quantity and statistical value of each commodity they export or import.

among the data that hmRc makes publicly available are the uK’s trade statistics. these are largely based on information generated by the chieF system, and via intrastat. this data is freely available online and is used by government departments, international organisations, academics and businesses, who regularly utilise this data for market research and economic analysis purposes. it is published online through the government’s main web portal, and is managed by a specialist trade statistics unit within hmRc. this data is also used as part of the uK’s balance of payments calculations.

The office for national statisticsthe onS is the uK’s national statistical institute, responsible for collecting and publishing a wide variety of data related to the economy, population and society, as well as conducting the census in england and wales every ten years. the onS, and the uK Statistics authority that oversees it, are established as independent bodies that operate at arm’s length from government, but are directly accountable to parliament. this system is designed to safeguard the neutrality and independence of the statistics they produce.

the onS uses a range of sources for its statistics, including government departments, and specific surveys. For its financial data onS uses information provided by hmRc and the Bank of england, but also collects data from less well known organisations such as the uK debt management office, national Savings and investment, the investment management association and the insolvency Service.

Financial Conduct authority the Fca is the uK’s financial services regulator, and identifies three types of data that it needs to collect: core data that is regularly reported to the Fca, and generally collected via returns filed through an electronic reporting system; ‘Risk and event’ data which is collected from a range of companies for a short period relating to specific risks identified by the Fca; and, ‘Subject, firm or issue specific’ information, which can be collected in a range of ways, such as part of an investigation. this data is stored in a way that, unless specifically market sensitive, is available across Fca departments to allow a more cohesive approach. however, due to the sensitivity of this material it is generally not used for many wider purposes.

the Fca is in the process of improving its data policy, and have established a new department to drive this. they are establishing a system that is more clearly specified, more regularised, and collected through controlled channels to ensure consistency. a major emphasis is being given to providing clear explanations about why specific data is needed and how it was to be used, and avoiding unreasonable timescales, which divert resources and put unnecessary pressure on the regulated companies. they are also increasing the use of technology platforms in data collection.

data policiesas well as the data itself, most uK government departments also have publicly available data policies to outline their approach to this issue, increasing the transparency of how data is used and why it is collected, improving understanding on the part of the reporting entity as well as the relevant government departments.

in addition, the data protection act controls how personal information is used by businesses and the government to help ensure that private data is kept securely and used fairly, lawfully, accurately, and not excessively. on top of this, the Freedom of information act, gives citizens the right to access recorded information held by public sector organisations, and there is a clear procedure to make requests to central and local government bodies for such material.


14 6. coRpoRate inFoRmation collection and tRanSpaRency in the united StateS oF ameRica

6 coRpoRate inFoRmation collection and tRanSpaRency in the united StateS oF ameRica

public and private corporations operating in the u.S. are required to file a variety of information with a range of relevant government departments depending on the nature of the company and their activities. these can include the Securities and exchange commission (Sec), internal Revenue Service (iRS), Bureau of labor Statistics, and the departments of the environment to name but a few.

Financial informationmost public corporations are required to file their quarterly and annual financial audit reports with the Sec. if filed by domestic companies, these statements are then available to the public. unlisted entities, if they have more than $10 million in assets and their securities are held by more than 500 owners, must also file annual and other periodic reports with the Sec, and these reports are also available to the public. these Sec reports contain both financial information and tax disclosures, as well as more general information including shareholders, board member information, and the office address.

electronic data collection began in 1984 with the introduction of the electronic data gathering, analysis and Retrieval System (edgaR). public companies, both foreign and domestic, are required to file their registration statements, periodic reports, and other forms electronically through edgaR, and this information is then available to the public for free through the Sec’s website.

in the u.S., private corporations do not need annual statutory audits, although some require them if stipulated by debt covenants or financing arrangements. private companies’ information is thus confidential, and private companies have the ownership of this data, so access to general legal information regarding specific private companies depends on whether the company in question has chosen to share this material (often on their own website).

Tax informationBoth public and private corporations are generally required to pay federal, state, and in some cases, local taxes. tax disclosures are required within the financial statements filed with the Sec by public corporations, in addition, the Sec requires tax disclosures for some specific transactions. any such disclosures reported to the Sec are publicly accessible. however, with very limited exceptions, all tax return information is confidential and cannot be shared with the public, and an unauthorised disclosure of tax return information may result in civil or criminal penalties. though, where specifically authorised by a federal statute or tax treaty, the iRS can (and do) share taxpayer and tax return information with states and with tax treaty partners.

statisticspublic and private corporations are also required to file information regarding their employees and location with the Bureau of labor Statistics and other state governments for statistical purposes, though filing requirements can vary in different states and industries. generalised statistical results are open to public, however, the governments and the staff who receive the raw information from corporations have the obligation of protecting privacy and commercial secrets.


157. coRpoRate RepoRting in canada

7 coRpoRate RepoRting in canada

starting a corporationa corporation is set up in canada by completing the articles of incorporation, and filing them with the appropriate provincial, territorial, or federal authorities. if the business is incorporated federally, this can be done online, and takes just one business day. the information required to incorporate federally includes: the corporation name; the registered office, the description of classes of shares; restrictions on share transfers (if any), number of directors, restrictions on business activities (if any), other provisions (if any), and the first board of directors.

Tax registration and maintaining a corporationcompanies in canada generally need a Business number. the canada Revenue agency has an auto create arrangement with the federal authority, and certain provincial authorities. as such, if a new company is set up under these federal or provincial authorities, certain incorporation information will be communicated to the canada Revenue agency, who will automatically generate the Business number for the corporation. if the canada Revenue agency has no auto create arrangement with the province or territory where the company was incorporated, the company can still register for a Business number by providing certain information to the canada Revenue agency.

almost all resident corporations have to file a corporation income tax (t2) return every tax year, even if there is no tax payable. if applicable, a goods and Services tax (gSt)/ harmonized Sales tax (hSt) return is also required either monthly, quarterly or annually.

employers also need to deduct payroll taxes at source, and employees’ income and deductions should be reported through the appropriate tax forms. when a business charges its customers or clients for hSt, the customers or clients can confirm with the canada Revenue agency by phone or online whether an hSt number is valid and whether the name of an hSt registrant agrees to the name on the invoice.

tax data filed with the canada Revenue agency is only accessible by authorised persons, such as the owner, the key employees and the external accountants and attorneys (if authorised).

annual returnevery corporation subject to the canada Business corporations act (cBca) must file an annual return with corporations canada every year if its legal status is active (i.e., not dissolved, discontinued or amalgamated with another corporation). the annual return can be filed online via the corporations canada online Filing centre or by mail.

the filing fee is also half the price if filed through the online Filing centre, rather than hard copy. the annual return helps keep the corporations canada’s database of federal business corporations up to date. this information is available to the public, and can be utilised by a range of users (such as investors, consumers, financial institutions and many others) to make informed decisions about a specific corporation.


16 8. SucceSSFul data collection, utiliSation and tRanSpaRency

8 SucceSSFul data collection, utiliSation and tRanSpaRency

The need for a clear and well-established data frameworkthe more that companies understand what is required of them, and why it is required, the easier it is to comply. clear communication between firms and the relevant government departments is vital to this. published data policies by relevant agencies and government departments are an invaluable tool to help the companies that must supply their information to understand the data that they need to prepare, and the reasons for filing.

a transparent policy, with simple and clear instructions for a limited, but highly relevant, amount of reporting is vastly preferable to wide ranging requirements with a lack of focus.

Collecting the right data a clearly defined framework or policy can also help departments to analyse what they need to collect and why.

Reducing the reporting of unnecessary information is beneficial for both government departments and companies. more data can mean better informed decisions, but the burden of supplying and processing this information can easily outweigh the potential advantages. the collection of data that has no clear or defined use merely slows and complicates the system. agencies and government departments will find the process of data collection and management is more efficient if they focus on what purpose they need to fulfil, and only request data absolutely necessary for achieving this.

simplifying filing and online platformsthe most straight forward way of reducing the compliance burden, without increasing risk, is to maximise the simplicity and efficiency of data collection.

there is a clear movement across the world to streamline data collection through the use of information technology. online portals make the act of submitting information quicker and cheaper, and this helps to speed up and simplify the filing process. this technology can also improve the analysis and treatment of this information by the government.

in addition, better data sharing platforms across government departments and agencies can help prevent the need for double filing of the same, or similar, information more than once.

harmonisation and standardisationa convergence of the platforms and methods used for different filing requirements with different agencies is another major step forward. this reduces double filing and facilitates more straightforward data sharing and inter-governmental department transparency.

many countries have now implemented a system that can be used for company formation, on-going reporting, and even for dissolving a business, all through one, user-friendly platform. nationwide systems also make it easier for companies to operate in more than one location.

Standardisation of forms, requests and systems leads to increased familiarity, which makes it quicker and easier to use, assisting in the efficiency of preparing submissions. the provider can easily identify what is required, and the processor can compile and analyse the information with more ease. Standardisation of submissions also assists with the use of online filing and electronic data storage and analysis platforms.


178. SucceSSFul data collection, utiliSation and tRanSpaRency

regular and predictable implementationalong with standardisation, regular reporting periods make it easier for companies to plan for compliance. it also means that businesses can build systems to efficiently collect the required figures.

ad hoc information requests, unless absolutely necessary, make resource planning difficult, and also complicate the use of automated, or simplified, generation of the necessary material, increasing the burden of compliance.

a move to collect information regarding specific transactions after the event can maintain the need for companies to comply with laws and regulations, but still allow them to react quickly to business opportunities.

data transparency, protection and availability

easy access to reliable information, such as publicly filed accounts and credit records, can help improve corporate decision making and assist directors in evaluating transactions with partners or counterparties more accurately. this ultimately reduces risks within the economic system. however, companies must naturally provide sensitive information to the government, and it is vital that the value of transparency is balanced with the protection of commercially sensitive information.

as more data is collected, utilised and published, a clear data protection policy, and regulations, helps to establish and defend the balance of what is beneficial to society, and what is sensitive for individual companies.


18 9. concluSion: BeneFitS and diScuSSion pointS

9 concluSion: BeneFitS and diScuSSion pointS

new pilot systems designed to improve the way data is collected and treated in free trade zones across china will bring considerable benefit to both chinese companies and international investors. the Shanghai FtZ is clearly implementing a ground breaking new approach to data collection in china, and is developing a system that will put it on a par with international best practice.

it will reduce the amount of time it takes to provide the government with the information it needs, and local companies operating in these areas will be able to operate more efficiently, and competitively. it will also prepare chinese companies for more international practices, helping them to adapt as they go global, and increase their own activities overseas.

it will appeal to international companies, who will be able to set up and run a business more easily, using a system more familiar to them. this means they can focus on bringing their technology and skills to the chinese market, rather than managing red tape. a simplified business environment will also attract more multinationals to relocate more of their resources to Shanghai, and will begin to encourage a growing number of companies to establish regional headquarters in china rather than other locations across asia. ultimately, this will bring more value to the chinese economy.

the key to success will be a transparent and open approach to data through a clear policy, standardisation, a simple interface, regularised implementation and of course, the use of technology.

publishing a transparent data policy will help this, and is an important part of the process of carefully considering what needs to be collected. companies are still required to supply the authorities in Shanghai FtZ with a comparatively large amount of information, and the nature of this information could be analysed to ensure that all data collected has a clear use.

the new online ‘one-stop shop’ for company formation is a very positive move as one application saves time and money, compared to registering with

a range of different bureaus one after another. it is also a positive step towards building a comprehensive reporting platform and this same system can be expanded for filing further necessary corporate information throughout the life cycle of the business.

the expansion of this platform to other areas of china will also be a major benefit to companies operating across the country. localised differences in implementation in cities and provinces can be a challenge to new market entrants, so a standardised national platform, once tested in Shanghai FtZ, would be extremely welcome.

easier access to publicly available accounts and company records will also be highly valuable, and the Shanghai FtZ’s online platform could be extended to allow more access to such information. Registration records and financial statements prepared to appropriate accepted accounting principles need not divulge commercially sensitive material, but would have a range of uses. in particular, gathering information on potential business partners can be a challenge, so easy access information will allow more confidence and more informed decision making for transactions. once tested, the use of this same platform to form a national database would make working with counterparties simpler and quicker throughout china.

the role of free trade zones is, at least in part, to help experiment with liberalising the economy, streamlining government regulation, promoting administrative reform and providing a path for further economic development. Formalising and defining the policy and methodology for data collection and transparency is a relatively straight-forward, low risk way of furthering all these aims, and helping the economy to develop. the measures already implemented in Shanghai are an important step in the process of upgrading data collection and utilisation, and we look forward to seeing them implemented in other free trade zones as well, and across the whole country, as soon as they are fully tested.

thecityuK represents the uK-based financial and related professional services industry. we lobby on its behalf, producing evidence of its importance to the wider national economy. at home in the uK, in the eu and internationally, we seek to influence policy to drive competitiveness, creating jobs and lasting economic growth.

uK-based financial and related professional services contributed 12% of uK gdp in 2013. over 2 million people work in the industry across the country, two thirds of whom are outside london. our industry employs 7% of the population and the productivity of these jobs is 70% above the uK average. Foreign companies invested around £100bn into uK financial companies since the start of 2007, more than in any other sector. the uK is europe’s financial centre and leads the way in international banking, fund management, international insurance, private equity and derivatives trading. the uK also holds a leading position in the delivery of accounting services, legal services and management consulting.

Financial and related professional services are the uK’s biggest exporting industries. we make a £55bn contribution to the balance of trade, helping to offset the trade in goods deficit. thecityuK creates market access for its members through an extensive programme of work on trade and investment policy. to achieve this, we work closely with governments and the european commission to represent member views and help deliver the best outcomes in international trade & investment negotiations. allied to this, we have a country-focused programme to build relationships and to help open markets where our members see significant opportunities. we also have a strong focus on ways of influencing and delivering regulatory coherence through dialogue with regulators, governments & industry bodies internationally.

the china-Britain Business council (cBBc) is the leading organisation helping uK companies grow and develop their business in china. we help uK companies of all sizes and sectors, whether new entrants or established operations, access the full potential of the fastest growing market in the world. we offer practical in-market assistance, services, industry initiatives and a membership programme delivering access, seminars and networking.

through 60 years of engagement, we have built up exceptional connections with government and business across china. our Board is made up of senior business people from companies with a strong china interest, and our business advisers have extensive first-hand experience of doing business in china. we deliver our services and advice through 10 uK offices and 13 offices across key locations in china. this in-country network provides invaluable local insight, access, and knowledge. Find out more at www.cbbc.org

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this report is based upon material in thecityuK’s possession or supplied to us from reputable sources, which we believe to be reliable. whilst every effort has been made to ensure its accuracy, we cannot offer any guarantee that factual errors may not have occurred. neither thecityuK nor any officer or employee thereof accepts any liability or responsibility for any direct or indirect damage, consequential or other loss suffered by reason of inaccuracy or incorrectness. this publication is provided to you for information purposes and is not intended as an offer or solicitation for the purchase or sale of any financial instrument, or as the provision of financial advice.

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THECITYUKFor further information about thecityuK’s work on china’s Free trade Zones, please contact:

Bryan cress, Senior international manager, asia pacific [email protected] +44 (0)20 3696 0122

this paper has been produced by grant thornton in conjunction with thecityuK’s Free trade Zones international experts consultation group and the china-Britain Business council.

grant thornton grant thornton is one of the world’s leading organisations of independent assurance, tax and advisory firms. more than 38,500 grant thornton people, across over 130 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.

grant thornton member firms across the world have focused china Services groups to help international clients do business in china. these are multi-disciplinary teams of bilingual specialists, combining technical expertise with the intuition, insight and confidence gained from our in-depth experience assisting companies to expand across the world. we have a deep understanding of the different business cultures and provide meaningful and forward-looking advice to help dynamic organisations unlock their potential for growth. we provide advice on every stage of a company’s expansion from company set-up, acquisition targeting, raising capital and cross-border transfers of funds, to providing robust assurance and proactive tax planning and supply chain management.

grant thornton china, headquartered in Beijing, with 19 offices across mainland china and hong Kong, was established in 1981, and offers a full range of assurance, tax and advisory services to public companies, state owned enterprises, private companies and international businesses.

contributors / acknowledgements grant thornton china: sally Xu, rose Zhou

grant thornton uK llp: duncan Levesley, simon Bevan, Zoe Wyatt, sarah day

grant thornton llp canada: Judy Lin, Tom owen, Jin Wen, Vicky Liu

grant thornton llp (uSa): sandy Chu, Ying dou

For further help in the Shanghai FtZ, or across china, please contact duncan levesley ([email protected]).

we would like to thank prudential for reviewing this paper.

about the authors