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China Economy

Trump’s tax cut plan will wreak chaos and incite ‘tax war’, says Chinese commentary

People’s Daily article reflects Beijing’s concerns about Trump’s tax proposal

PUBLISHED : Friday, 28 April, 2017, 1:09pm
UPDATED : Friday, 28 April, 2017, 10:48pm

A commentary carried by a Communist Party mouthpiece has lashed out against US President Donald Trump’s new tax cut plan, accusing him of inciting a “tax war”.

The cuts, if approved by the US Congress, would “wreak chaos in the international taxation order”, according to the commentary in the People’s Daily newspaper on Friday.

The Trump administration had on Thursday unveiled its tax proposal, which included cutting the corporate tax rate to 15 per cent from 35 per cent and streamlining individual tax brackets.

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“From other countries’ perspectives, the United States’ tax cut is actually inciting a tax war,” said the article by commentator Wei Liang. “To respond, some powerful countries may join the game to launch competitive tax cuts ... Such signs are already visible in Britain and France.”

It added that the tax cut plan would undo “international efforts” in cracking down on cross-border tax avoidance and hurt some export-oriented economies as well.

Though the commentary is not an official statement from the Chinese government, it reflects Beijing’s concerns about the potential impact of Trump’s tax proposal.

Trump’s tax cut plan poses a new threat to China

The plan offers a one-time tax break on corporate profits brought back to the US from overseas, which incentivises American businesses to bring their offshore operations back home.

The tax break would add to the pressure on China’s capital outflow.

Lower taxes in the US might also accelerate the hollowing out of China’s manufacturing industry, economists warned.

The tax burden that businesses in China face include a 17 per cent value-added tariff and 25 per cent income tax.

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Beverage tycoon Zong Qinghou, one of China’s richest entrepreneurs and chairman of the Hangzhou Wahaha Group, has said that his business was subjected to more than 500 tax items and government charges last year.

The Ministry of Finance, however, said the actual number was 317.

Beijing lowered corporate taxes by more than 500 billion yuan (HK$564 billion, US$72.5 billion) last year and has pledged to continue doing so, but enterprises and individuals continue to complain about the country’s heavy taxes.

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The People’s Daily commentary sparked debate on Chinese social media, with some criticising China’s own taxation scheme.

“Let’s join the war and cut taxes aggressively as well,” one Weibo user wrote.