Tax cuts in the offing
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One example of a possible tax cut is that of making adjustments to both the rate and frequency of tax demands, thus expanding the tax base. Such a move might also encourage high-earners to keep their assets in China rather than transfer them to Hong Kong, Singapore or elsewhere, as many have been doing to avoid paying China's high personal income tax. Shanghai began pilot trials last year of a 25 percent ceiling on the income tax of financial executives in efforts to retain this source of revenue.
From another standpoint, tax incentives that enable small and medium-sized enterprises to expand and innovate will change the entire tax structure from that of robbing the poor to enrich the economy to a more balanced approach to public and government prosperity. Levying property tax, environmental tax and raising the tax on natural resources, moreover, creates an alternative source of government revenue.
Where will China be in 30 years' time? Whether or not the country can reverse its present mode of high foreign, low domestic demand, make a smooth transition from high to low carbon and successfully channel its economic strength towards enriching the people will determine China's future.
China's economic development should encompass orderly, fair distribution of large state-owned assets to the masses. This is in itself both the purpose and manifestation of social and economic progress, and implies even more allocations of government resources to public services. China must accept the contemporary reality that tax reforms are equal in priority to reforms of state monopolies and land tax.
Today's tax reform should help to define China's future approach to development; neither the Rich Country, Poor People line of the past 30 years, nor the opposite Poor Country, Rich People line, but one whose goal is a commonly prosperous government and civil society.
There are clear regional disparities in China which urbanization funded through the market would exacerbate; market forces alone cannot narrow the social security gap or balance regional disparities. This can only be accomplished through a powerful central government. Tax reforms directed at enriching the people to stimulate the private sector, must therefore simultaneously reinforce government financial vigour. The corresponding establishment of a sound national social security system and fiscal and financial transparency is, of course, also imperative.
The author is a commentator with China Youth Daily.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn
(This post was first published in Chinese and translated by Pamela Lord.)
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