Taxman defends 20pc leap in revenue
A high-profile collection campaign has paid dividends, but critics fear it is hindering economic growth
China's top tax collector has defended the nation's aggressive tax-collecting tactics, saying that a 20 per cent rise in revenue last year was more than reasonable.
Tax coffers swelled last year by 346 billion yuan to a total of 2 trillion yuan, a 20.3 per cent increase. Revenues rose on the back of a campaign of high-profile arrests of business executives - and in one case a film star - for tax evasion.
However, some economists have been critical of the government, arguing that its tax policies will hinder economic growth.
'We have conducted an in-house study of [such criticism],' said Xie Xuren, head of the State Administration of Taxation. 'We looked at the nation's economic development, our administrative practices and our tax policies. We believe last year's fast rise in tax revenues was reasonable.'
Hu Biliang, a senior economist with the Chinese Academy of Social Sciences, said the government's taxation system needed radical reform. Instead of focusing so much on tax collection, the administration should focus more on using tax rebates to encourage domestic enterprise growth and investment, he said.
'When I read the news of the rapid rise in taxes I was both happy and sad,' said Mr Hu, author of a recent book on China's macro-economic development and strategy.
'China is a developing economy, but the government is increasing taxes too fast. If you increase taxes too fast, this isn't good - it will arrest growth.'
The tax commissioner and his two deputies defended government tax policies, saying the revenue stimulated growth.
Deputy tax commissioner Hao Zhaocheng said the government had given more than 3.5 billion yuan in tax rebates to firms to re-employ about 19 million workers laid off from state firms.
'Our policies do focus on stimulating growth,' said Mr Hao.
'First among our policies is one that encourages laid-off workers to set up businesses. Those who do will enjoy a three-year income tax holiday.'
He said another policy was to encourage new small and medium-sized firms to hire workers who have been fired from state-owned enterprises. New firms with 30 per cent or more of their staff being laid-off state workers can enjoy a three-year tax holiday.
Firms that cannot hire so many former state workers can still qualify - for every 1 per cent of the workforce comprising former state workers, the government will offer a 2 per cent income tax exemption.
Mr Hao said existing businesses could also enjoy tax breaks by hiring laid-off workers. For every laid-off worker employed, a firm could enjoy a 2,000 yuan tax exemption.
'Our focus is on using tax policy to maintain social stability,' Mr Hao said.
Mr Hu of the Chinese Academy of Social Sciences said he approved of such tax breaks but encouraged the government to cater more to domestic private entrepreneurs.
Foreign investors can enjoy a wide range of tax exemptions. However, such exemptions are not available to domestic companies, which must pay a flat rate of 30 per cent of their income to state coffers.
Business owners who do not pay taxes on time risk being jailed.
Mr Hu said he was glad the government was becoming more effective against tax cheats. But he believed it still had a long way to go to create a taxation system that treated everyone equally.
