Tax cut bandwagon is rolled out again but makes no headway

PUBLISHED : Sunday, 11 March, 2012, 12:00am
UPDATED : Sunday, 11 March, 2012, 12:00am
 

Confucius has many disciples indeed. He would be happy if he were brought back to life at the annual National People's Congress (NPC) in Beijing. No longer content to serve as a mere rubber-stamp body, many lawmakers at the current session have complained, as reported by the mainland press, about the heavy tax burden on the people.

The 2010 NPC is remembered as the first time that mainland lawmakers campaigned for tax cuts.

Confucius protested against heavy taxes when he lived in the 6th and late 5th centuries BC, and one of his most widely remembered aphorisms is that a government that taxes its people too heavily is 'to be feared more than a tiger'.

China's tax revenue was equivalent to 15.7 per cent of gross domestic product in 2002. It has kept rising, despite the government's occasional attempts at 'structural' tax cuts, to almost 23 per cent of GDP in 2011.

But Jia Kang, director of the Ministry of Finance research institute, said real tax revenue was even greater, and in 2011 it was equivalent to 32 per cent of GDP.

According to Cenn.cn, a website owned by the China Enterprise Confederation and China Enterprise Directors Association, taxes account for only a third of the payments charged by various government agencies to small enterprises and the self-employed. The remaining payments are administrative charges and fees.

Thus, people's deputies at this year's meeting in Beijing are prone to mention the nation's 'tax pain'. This is felt most acutely by the salaried class rather than the more wealthy, Jia said at the concurrent session of the Chinese People's Political Consultative Conference (CPPCC), a high-level government advisory body.

Also at the CPPCC, Li Jiange, chairman of China International Capital, a Chinese financial service company, said that since 2003, government revenue had been rising by 10 to 20 percentage points faster than GDP, a 'rare' occurrence in the modern world.

This year, Li claimed, government revenue would easily grow by 9 per cent even after 1 trillion yuan (HK$123 trillion) of tax cuts for enterprises and citizens were implemented. And the economy could benefit immensely, as that amount is recouped through reinvestment or consumer spending.

Media are wasting no time joining the campaign for tax cuts. Writing in National Business Daily, independent financial commentator Ye Tan lauded the anti-tax movement in the NPC as precious 'in a society where consensus is hard to achieve'.

She lamented that the government had appropriated so much of society's wealth through taxes that it was leading to a virtual conflict between the government and public well-being.

Ye urged the public to be on guard against any attempt to direct the government's would-be tax cuts to wrong purposes - where they could hatch new corrupt schemes by officials - or against their being offset by new levies and charges to small enterprises.

A column in Guangzhou Daily said that in reality the government's promised structural tax cuts in the past few years were negligible. It was time to abandon that unworkable programme and introduce all-round tax cuts to help all small and medium-sized companies and to nurture the middle class.

On Friday, the official People's Daily (quoting the magazine China Entrepreneur) said that a recent survey showed 63 per cent of companies complained about excessive taxes and 90 per cent said they saw little results, if any, from structural tax cuts.

An editorial on Tianjinwe.com, the website of Tianjin Daily, called for a general tax cut starting with the scrapping of value-added tax on such everyday consumer items as drinking water, noodles and steamed buns.

A column in the Beijing Morning Post, a newspaper owned by the municipal government, said there were many government policies to boost retail sales but none would yield long-term results. This was because the nation's decision makers had not yet realised that China's domestic consumption could not grow steadily unless people had more money in their pockets.

The weekly newspaper Southern Weekend, published in Guangzhou, said that at the current rate average citizens would pay up to 1 million yuan in taxes in their lifetime.

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