Danger in rushing through new tax
If there is a way of imposing a new tax that is better than all the others, it is not to be found in Beijing's bungled social security tax on foreign workers. If mainlanders were affected the government would be the butt of online jokes. But the continuing uncertainty and confusion is no laughing matter to 230,000-odd foreign work-permit holders and their employers.
The start date of October 15 has come and gone with only the Beijing municipal government meeting the deadline. Other local governments remain as much in the dark as businesses who say the law remains vague and lacks detail. A briefing on Friday to explain it to foreign media ended in more confusion, with an official unable to answer questions and admitting that local governments had not completed arrangements for registering people and receiving payments.
Chinese nationals from Hong Kong, Taiwan and Macau are exempt. But for many companies, it will increase the cost of doing business, especially if they have to raise salaries to compensate foreign employees. The real benefits remain unclear, since many foreign workers are covered by company pension schemes and other benefits. The official could not say how foreigners would be able to access unemployment benefits when work visas tied to jobs become invalid in the event of lay-offs. And since no international hospitals are included in the plan, they will have to overcome language barriers to access medical services. As a result at least 10 countries are scrambling to follow the lead of South Korea and Germany in negotiating exemptions for nationals covered by social security at home.
Despite all these concerns, Beijing says there is no going back and, when local governments get their act together, the levy on bosses and workers will be backdated. None of this does anything for China's international economic relations. A new social security tax that is of unclear benefit, hard to understand and hard to implement sounds more like one that should not be rushed in without being properly thought out.