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Taxing times for rich and famous

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Why you can trust SCMP
Mark O'Neill

'LIU XIAOQING has no privileges in prison,' screamed the front-page headline in the Beijing Morning News on Wednesday.

The arrest of one of China's most famous female film stars on suspicion of evading taxes of more than 10 million yuan (HK$9.4 million) marks the spectacular start of a campaign to force the rich and famous to pay personal income tax.

The scheme is not only about money and increasing the revenues of the Ministry of Finance, which is running a record budget deficit this year and is straining at the seams to meet all the demands placed upon it. It also has political aims - to ease public rage over the widening gap between rich and poor and the injustice that those who pay the largest proportion of their income in tax are poor farmers, while those who pay the lowest are the super-rich.

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Another constituency the government aims to please are conservatives in the Communist Party who bitterly oppose party chief and President Jiang Zemin's decision to allow private business people to join. At the 16th Party Congress this autumn, he plans to change its constitution to include his 'Theory of the Three Representatives' as the groups which the party should represent.

The first of these is 'the advanced productive forces', including the private sector, the most dynamic part of the economy.

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Last year a group of retired army officers, ministers and other veteran revolutionaries wrote a letter to the party's Central Committee accusing Mr Jiang of treachery and destroying the party by admitting members of the capitalist class and representing their interests, instead of those of the working class and farmers.

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