| Reduce personal tax for these rich people? | |
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| Mar 8, 2008 01:27 |   |
 | An official sugguests that China should reduce these top talents' personal tax. In this way, more and more multinationals and top talent people will be attracted to settle down in China. This is good for China's deveopment. But some people object to his suggestion. In their opinion, it is unfair to reduce rich people's personal tax but levy heavy tax on the public. What's more, they are afraid that social contradictions might be aroused. What do you think of his suggestion? Should we reduce personal tax for these rich people? |
| Mar 8, 2008 10:18 | #1 |
| China is in early stage of market economy. Income disparity seems inevitable. Likewise, Taxation system in china is just far far away from mature in comparison with developed countries. Government tax revenues are supposed to redistributed to the social majority, such as public education, public infrastructures, social security, etc. Developed countries have set up a good sample for China to follow: that is equal chance of receiving education no matter poor or rich, facilitating conditions for equal competition. What China faces is social crisis – gap between poor and rich. The widening gap proves that China is still in baby stage in development course and one of the major reasons for this is its regulations system including taxation is vulnerable or underdevelopment. I came up with a good article stating the major causes of income disparity in china as the following abstracted. |
| Mar 8, 2008 10:20 | #2 |
| China: a shared poverty to uneven wealth? Taejoon Han The George Washington University The Elliott School of International Affairs (2) Major causes of income disparity. The signs of serious income disparity began to occur soon after the Chinese government has granted regions and individuals with the conditions for them to get rich first through special, preferential policies. Such course of polarization in China may be an unavoidable situation since the country has been on the developmental stages of economy. In this paper, however, we will not be discussing about the general causes of income disparity which have been previously studied in numerous materials.. a. Unlawful factors. In this paper, "unlawful factors" include; exploitation of policy, systematic, and administrative loopholes, and abusing individual's power to gain personal wealth through illegal profiting, and tax evasion. · Significant decrease in the state finances has caused many problems of corruption in government institutions and organizations in recent years. There have been reports on the abuse of power for personal gain and exchanging power for money. |
| Mar 8, 2008 10:20 | #3 |
| · There has been ongoing illegal activities which involve a large scale diversion of state assets into private hands. One estimate puts it at a rate of 100 million yuan a day or 36.5 billion a year. A significant portion of this amount is used in personal investment which is often unproductive and mismanaged creating a loss. This is not only adding problems to a lumbering public sector but also widening the income disparity by benefitting only a small minority. · A portion of the corporate income is being disguised as personal savings to avoid official supervision and to capture higher interest. Chinese banks have paid a higher interests on personal bank deposits and bonds which is thought to have also contributed to a such phenomena.7 The growth in savings has far outstripped GDP growth between 1991 and 1994. According to one estimate, the financial and equity assets of Chinese citizens have increased 70 and 100 times respectively during this period. For instance, in 1994, the total increase in urban wages was 170 billion yuan- only a third of the growth in urban personal financial assets. However, the total financial assets of Chinese citizens increased to 580 billion yuan that year which is 470 billion more than their net income. Even if we ignore the living expenses this amount defies the common explanation in terms of wage income growth. |
| Mar 8, 2008 10:21 | #4 |
| · According to the government statistics in 1996, roughly about 50% of all individual income tax is drained off yearly. Plus, over 90% of self-employed business people and 80% of private enterprise owners have a record of tax dodging.6 These are caused primarily by citizens' vague concept of their responsibility to pay taxes, and regulators' weak enforcement of existing tax laws. Back to table of contents b. Uneven distribution of resources between different regions. China's development policies have long created an unbalanced regional development by variations in resource allocation. Thus, in 1949, 71.5 per cent of Chinese industry was concentrated in the coastal areas, and only 28.5 per cent in inland regions.8 When the Chinese leadership in the early 1950's started its strenous efforts at industrialization, it regarded the huge coast-interior imbalance as irrational. During the Maoist period, therefore, the government carried out an interior-oriented regional development policy.9 Furthermore, Maoist leadership pursued a nationwide self-reliance policy encouraging each region and locality to act as an autonomous production unit. Such changes were implemented in order to substitute the role of market or larger planning apparatus. Thus, the principles of regional specialization and exchange and the advangtages of specialization in production on a comparative advantage based on cost was ignored until the reforms began in China. |
| Mar 8, 2008 10:22 | #5 |
| Although China's post-Mao regional development strategy has gradually increased mobility of resources, inappropriate measures or poor management on the part of local authorities and enterprises during the reforms resulted in losses of large quantities of state or collectively owned assets and resources. The bulk of resources also went directly or indirectly into the hands of private individuals and for the most part embezzled by a minority of people. Table 2-4 shows the gaps between three regions by using the social and economic indicators. Notably, the size of the economies differ greatly from the number of employed persons to the amount of outstanding savings deposits. For instance, the amount of utilized FDI in eastern provinces outnumber the western provinces by over 25 times. From the given data, we can identify the following characteristics about the regional resource distribution: · Human resources are concentrated in coastal areas but mineral resources are deposited mainly in the interior area. As we can see from Table (2-4), the number of industrial labor force worked and lived in the eastern area (approx. 250million) was almost 49 per cent of the total number in 1996. On the other hand, most of China's minerals, forests and other natural resources are located in northwestern and central China. Only one fourteenth of the nation's coal reserves are located in the coastal regions while more than 92 per cent of its coal deposits are in the interior. About 90 per cent of the nation's forests are in the central and western areas while less than 10 percent are in its coastal regions. |
| Mar 8, 2008 10:23 | #6 |
| · The coastal regions possess a well-developed financial base and manage a relatively high level of capital accumulation. Over 61 per cent of the total investment in fixed assets was made in the eastern region in 1996. · Productivity and living standards in the coastal are higher than that of the interior regions. · Disparities in the technological capabilities between the coast and the interior are significant. The eastern region possesses over 49 percent of the total number of R&D institutions in 1996. Therefore, an uneven distribution of resources between the different regions is a basic feature of China. The coastal area has a relatively well-developed economy and technological base with better access to capital but is handicapped by over-population which could lead to future problems. By contrast, the interior area is characterized by a vast land area, rich mineral resources, sparse population, and weak technological capabilities.10 Because of their different resource bases these areas could complement each other. |
| Mar 8, 2008 10:44 | #7 |
| I am not certain that MARRIE is correct that other nations have set good examples of how China should set up its tax structure, but that is for the Chinese people to decide. My philosophy is simply that governments should not tax people's earnings, but should tax consumption. For instance, a person with great wealth buys a Mercede Benz and pays percentage of the selling price in tax; a person with less money buys an electric bike and pays the same percentage tax. The tax from the rich person and the common person reflect their relative wealth. Taxing consumption is the only fair tax system. Of course, as a conservative American, I do not believe government should be the provider of education, health care or social welfare. ...but much of the world gives those powers to government. As a general rule, governments are very good at taking money from hard working people and very bad at spending that money for the benefit of society. |
| Mar 8, 2008 11:21 | #8 |
| government should be the provider of education, health care or social welfare. ...but much of the world gives those powers to government’’ Griz, I appreciate US way in terms of low interest rate, low taxation, encouraging consumption, respecting INDIVIDULE hard work. It’s a forever-young nation. And that’s why US is an exceptional outstanding in the WEST although it has much lower social security compared with it neighbour, Canada ( this country seems to have many features in SOCIALISM described by KARL MARKS). |
| Mar 9, 2008 21:24 | #9 |
| Impossible! It is unfair to reduce the rich people's personal tax. How about those ordinary people? Do they have to burden that part of tax that should be paid by the rich? We just widen income disparity by reducing personal tax for those rich people. IMO, we should levy more taxes on the rich people and use the revenue to help the poor. The rich has taken much from the society so that they should return more to the society. |
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