China Experiments With CBDC Tax Payments

Citizens in China have reportedly begun paying taxes with the digital yuan as part of a pilot program in the Zhejiang province.

As Crypto News reported Friday (April 29), several government organizations in that part of China are testing solutions involving digital yuan transfers to pay taxes.

In March, the Zhejiang Provincial Taxation Bureau of the State Administration of Taxation joined forces with the Hangzhou branch of the central People’s Bank of China (PBoC) to “actively explore the development of digital yuan tax payment” solutions, with “several” real-world trials conducted in the province, Crypto News said.

Learn more: CBDC Regulations Taking Shape on the Global Stage, Tax Policies in Focus

Since the start of this month, a number of local tax bodies have offered citizens the chance to pay income tax, stamp duty, social security premiums and fees with the digital yuan. Large state-owned banks like the Industrial and Commercial Bank of China, the Bank of Communications, and China Construction Bank have also begun exploring “tax payment” related business.

As PYMNTS has reported, tax policy is helping determine how central bank digital currencies (CBDCs) like the digital yuan are embraced. For example, the Organization for Economic Cooperation and Development (OECD) has discussed amendments to reporting standards that would cover e-money providers that aren’t already depository institutions.

The Crypto News report quotes a Zhejiang Provincial Taxation Bureau official who noted the digital yuan was simply “a new payment method,” and not a replacement for cash and bank transfers,” adding that the token would “become an effective supplement to existing tax payment channels.”

But the official added that the digital CNY “better supports online tax processing,” offering citizens faster, remote tax payment confirmation.

See also: China’s Central Bank to Expand Digital Yuan Trials to More Cities

Earlier this month, the Peoples’ Bank of China announced plans to expand its trial for digital yuan into more cities following a positive market response to the use of the CBDC in both the pilot cities and the Winter Olympics venues where it was tested.

Transaction scales had been “growing steadily,” the bank said, adding it wanted to include more privacy protection and crime prevention, while also be researching the impact of the coins on the financial system.