China's tax authorities have deepened the rectification of the so-called invoicing economy to curb irregular investment attraction while ensuring the normal invoicing needs of compliant enterprises.

From January to April, the invoiced amount in six industries with a high concentration of enterprises involved in irregular investment attraction — including the comprehensive utilization of waste resources; recycling of renewable materials; wholesale of mineral building materials and chemical products; organizational management services; information technology consulting services; and road freight services — fell by 5.9 percent year-on-year, with the decline widening by 4.6 percentage points compared to last year, according to data from the State Taxation Administration.

An STA spokesperson stated that tax departments have worked with public security and market regulation departments to deeply rectify tax issues related to the invoicing economy. This has driven a continuous and nationwide decline in both the number of enterprises issuing irregular invoices and their total invoiced amounts.

A typical scenario of the invoicing economy involves some local governments breaking fiscal and tax boundaries to meet economic, fiscal or investment attraction targets. Through fiscal returns and subsidies, they attract shell companies — with no physical entities, personnel or real business — to create a false illusion of economic prosperity through mere numerical manipulation.

This practice detached from real business activities, distorts resource allocation, disrupts market fairness, triggers the phenomenon of bad money driving out good, and hinders the construction of a unified national market.

Since the normal business operations of some enterprises share similar characteristics with the invoicing economy model, it is difficult to make accurate judgments based solely on indicator analysis, requiring detailed verification based on actual conditions. For example, industries like bulk commodity trading feature large invoicing volumes, high single-transaction amounts and fast warehouse receipt circulation, which can easily resemble irregular behaviors such as "empty circulation".

The STA requires local tax departments to classify and handle cases based on enterprise behavior and risk levels. A one-size-fits-all approach without actual verification is prohibited, and authorities cannot simply suspend or limit invoices or lower invoice quotas, ensuring enterprises' normal invoicing needs are met. By continuously improving monitoring indicators and relying on tax big data to boost verification efficiency, the STA has issued positive and negative guidance cases to help grassroots tax departments accurately determine transaction authenticity. This ensures that normal invoicing for production, operation and contract fulfillment remains unaffected, striking a balance between guaranteeing needs and preventing false invoicing.

The STA recently introduced a combo of measures to standardize invoice management. It published a positive and negative list for compliant invoicing, providing clear, itemized guidelines that draw "standard" and "warning" lines for taxpayers.

The STA spokesperson said if taxpayers need to increase their invoice quotas, they can submit an application to their competent tax authorities along with supporting materials, such as relevant contracts and documents proving their actual operational status. Upon receiving the application, if the taxpayer can prove that their business is authentic, valid and commercially reasonable, the competent tax authority will promptly increase the invoice quota after review.

renqi@chinadaily.com.cn