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

China Free Trade Zones discussion paper
Regulating a Free Trade Zone –
Simplifying data collection and
improving transparency
SEPTEMBER 2014

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

FOREword 3
Regulating a Free Trade Zone – Simplifying data collection and improving transparency | 2014
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

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 benefits
Free 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 policy
A 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 opportunity
The 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.
2014 | Regulating a Free Trade Zone – Simplifying data collection and improving transparency

2. introduction: The role of free trade zones 5
2 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.

6 3. The role of corporate data collection and transparency
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.
Transparency
Transparency 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 7
The compliance burden
More, 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 investment
Red 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
4 Data collection, sharing and
transparency in China: practice
and pilot developments
Company formation
Overseas 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 disclosure
A 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 9
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 reporting
The 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 information
For 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 FTZ
The 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.

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.
Incorporation
Companies 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 compliance
Companies 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 filing
Some 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 records
The 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 filing
Her 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 data
Specific 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 transparency
Under 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

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 statistics
Overseas 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 Statistics
The 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 policies
As 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 information
Most 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 information
Both 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.
Statistics
Public 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.

7. Corporate reporting in Canada 15
7 Corporate reporting in Canada
Starting a corporation
A 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 corporation
Companies 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 return
Every 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
framework
The 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 platforms
The 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 standardisation
A 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.

8. Succefssul data collection, utilisation and transparency 17
Regular and predictable implementation
Along 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

About the authors
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 (duncan.levesley@uk.gt.com).
We would like to thank Prudential for reviewing this paper.
THECITYUK
For further information about TheCityUK’s work on China’s Free Trade Zones, please contact:
Bryan Cress, Senior International Manager, Asia Pacific
bryan.cress@thecityuk.com
+44 (0)20 3696 0122
TheCityUK, Salisbury House, Finsbury Circus, London EC2M 5QQ
MEMBERSHIP
To find out more about TheCityUK and the benefits of membership visit
www.thecityuk.com or email us at membership@thecityuk.com
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
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Copyright protection exists in this publication and it may not be produced or published in any other format by any person, for any purpose
without the prior permission of the original data owner/publisher and/or TheCityUK. © Copyright September 2014

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