Confusion reigns over mainland tax

PUBLISHED : Tuesday, 13 September, 2011, 12:00am
UPDATED : Tuesday, 13 September, 2011, 12:00am


Implementing a national insurance law was so vexing a problem for mainland legislators that they broke the usual rule of debating an issue three times and stretched discussions out over almost 16 years. Despite all the negotiations, though, there is still a lack of clarity so far as the section devoted to contributions from foreign workers is concerned, including those from Hong Kong. That part was delayed to iron out difficulties when the regulations took effect on July 1, but even with the new enactment date of October 15 so near, uncertainty persists. Rather than push ahead, officials should take time to consult and further consider where the arrangements are necessary.

While the mainland's Chinese workers require a better social security system, it is not needed by the majority of other employees. Most work for multinational corporations and are already covered for medical insurance, unemployment benefits, workplace-injury compensation, maternity leave and retirement. The mandatory law doubles up on these, requiring expatriates whose governments have not signed bilateral agreements with Beijing to further pay up to 11 per cent of their income into funds and their employers will have to contribute payments of as much as 37 per cent of salaries. It is a burden big enough to make some people and firms consider whether being based on the mainland is financially worthwhile.

Although approved last October, few people have seen the law, let alone drafts of it. This has led to confusion, doubts about specifics and uncertainty. It is unclear, for instance, how Hong Kong will be affected. There is no definitive answer on whether all identity card holders will be exempt, or if this will apply to only ethnic Chinese or permanent residents or maybe neither. Every worker on the mainland should have the benefit of a safety net. But if people are already provided for by company schemes, there should not be a need to make them also pay contributions to the state fund. Further delaying implementation and taking time to properly canvass opinions to make the law fair and effective is the most sensible way forward.