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Chinese income tax system has widen the wealth gap [Copy link] 中文

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Post time 2011-5-7 09:42:57 |Display all floors
source: h ttp://w ww.zaobao.com/zg/zg110506_009.shtml
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Post time 2011-5-7 10:15:50 |Display all floors
A professor also a high ranking government official, Li Daokui, said,
Chinese income tax system has widen the wealth gap. It's utopia to regulate the income redistribution by the present income tax system.

The backgroud of China
The major income wealth difference comes from the investment of assets.But the tax is different. For example, the house rental tax is only 5%, but wages tax is high and is collected by progressive tax.  

Chinese high income family usually don't get the monthly salaries. Entrepreneur, lawyers, accountants can manipulate and transfer avoid the income tax. If the tax was heavy, actually, none of income tax is collected from these faimlies, but at last only Chinese family who get monthly salalries pay the tax, and this lead to inequality.

The same time, owing to the unhealthy system and unhealthy social welfare, it is prevailing for Chinese to escape from the income tax with great dignity. In the end, Chinese who receive the fixed monthly salaries pay tax, and Chinese who get free money escape the tax. The income redistribution is deteriorated.

solution
Chinese present income tax have copied from the progressive tax of U.S style.But Chinese social foundation doesn't support such system. In U.S, income tax dominated the financial revenue. But in China, the tax from state-own companies, the mine, the land dominated the financial revenue. China need to practice flat tax like Russia, Singapore, Hongkong.

All of income need to pay the same tax, including the investment income, the divendend income, and other income beside labor work income.

The reform don't need to change overnight. Chna could set up a low flat tax rate, later improving step by step. For example change the present 7 levels to 3 levels, like 5%, 10%, 15%, several years later, only one level. China could trial in one province, or one city, or one district.
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Post time 2011-5-7 10:16:54 |Display all floors
Li Daokui is the director of finance department at tsinghua university.
He is also a high ranking government official in charge of monetary policies in Central Bank of China.

[ Last edited by 468259058 at 2011-5-7 10:27 AM ]
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Post time 2011-5-7 10:23:58 |Display all floors
What's progressive tax (US style)
What's flat tax (Russia, Hong Kong, Singapore style)

I'll learn them later.

I don't know if the solution is right, but I totally agree with the following judgements:

The major income wealth difference comes from the investment of tangible (like housing market) and intangible assets (like stock market).  

The income from investment of assets don't need to or need to pay far less tax than labor work income tax in China.

Owing to the unhealthy system and unhealthy social welfare, it is prevailing for Chinese to escape from types of tax with great diginity.

All of income need to pay the same tax.


[ Last edited by 468259058 at 2011-5-7 10:28 AM ]
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Post time 2011-5-9 12:17:22 |Display all floors
1. Government officials in government-own companies and Entreprenue in private-own companies. The actual yearly income including types of subsidy of some of them reaches to tens of million Chinese yuan.

2. Farmers (or landlords) in urban and some of suburban area. Most of them become millionair one night after the land are occupied. But they don't need to pay any tax.

3.  For example: the housing subsidies received by government officials in Central government
Every year, RMB 80 million yuan was spent through housing subsidies on the government officials in State-own assets commission of Central government.
(source: h ttp://w ww.china.com.cn/news/txt/2011-05/05/content_22504053.htm)
80 * 25 departments of Central government = 2 billion Chinese yuan
That is to say, officials in Central government receive housing subsidies, 2 billion Chinese yuan every year. But Officials don't need to pay any income tax for this housing subsidy.
Of course it would be a very very huge number after we calculate the other subsidies of government officials at all levels.

4. investors in housing market. Every Chinese know they earn huge profits, but they need to pay much less or none of tax compare with labor work income tax.
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