Are Chinese enterprises being taxed to death?
Zhang Jun says Chinese manufacturers will lose their edge and increasingly look for cheaper places to do business unless the tax structure is simplified and curbs put on soaring land and financing costs
Going strictly by the numbers, this doesn’t seem the case. Measured as the ratio of the government’s fiscal revenue to GDP, China’s overall tax burden is just over 29 per cent, or 10 per cent less than the global average, according to the International Monetary Fund.
China collects more taxes from producers, and less from consumers, than most developed economies
However, a recent World Bank report indicates that the total tax rate for Chinese enterprises averaged 68 per cent, placing China 12th in the world. This may be where Cao got his 35 per cent manufacturing tax figure.
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Though it is not clear how the World Bank calculated its rate, what is clear is that Chinese entrepreneurs and investors complaining for years about the heavy tax burden at home are far more inclined to agree with the bank than more favourable indices. One reason for this may be that China collects more taxes from producers, and less from consumers, than most developed economies. Li Wanfu, director of the Tax Research Institute under the taxation administration, says more than 90 per cent of all taxes and fees in China are paid by enterprises.
