Con­cern over higher in­come tax fu­els de­bate

China Daily (USA) - - VIEWS - The au­thor is a writer with China Daily. wangy­iqing@chi­nadaily.com.cn

The de­bate on whether a per­son earn­ing 120,000 yuan ($17,720) a year be­longs to the high-in­come group seems to have abated after sev­eral fi­nan­cial and tax­a­tion ex­perts close to the gov­ern­ment said re­ports say­ing “in­di­vid­u­als with in­comes above 120,000 yuan will have to pay higher taxes” were the re­sult of the me­dia’s misunderstanding of gov­ern­ment rules. But that has failed to ease peo­ple’s wor­ries over higher taxes.

The well-in­ten­tioned gov­ern­ment pol­icy aimed at in­creas­ing peo­ple’s in­comes hasn’t drawn enough at­ten­tion. In­stead, the public seems to be ob­sessed with one sen­tence in the doc­u­ment: higher taxes for the higher-in­come group.

The con­tro­versy may be the re­sult of the me­dia’s misunderstanding, but there are some im­por­tant so­cial prob­lems be­hind that misunderstanding. Di­rect taxes, es­pe­cially those im­posed on in­di­vid­u­als, are a big public con­cern not only in China but also in other parts of the world, be­cause they re­late to peo­ple’s vi­tal in­ter­ests.

The prob­lem is, as the ex­perts clar­i­fied to the me­dia, there is no of­fi­cial def­i­ni­tion for the “high-in­come group”. The only point seems to be what the me­dia high­lighted: the sys­tem of self-dec­la­ra­tion of “high in­comes” that re­quires in­di­vid­u­als earn­ing more than 120,000 yuan a year to de­clare their in­comes to the tax­a­tion au­thor­i­ties.

Of course the me­dia should not equate the term “high-in­come group” with the self-dec­la­ra­tion sys­tem be­cause gov­ern­ment doc­u­ments or laws don’t say so. But the fact is peo­ple be­lieve the “high-in­come group” earns huge amounts of money be­cause it has been sin­gled out by the tax­a­tion au­thor­i­ties as a key tar­get of in­spec­tion.

That, to a large ex­tent, has forced the public to de­bate whether an an­nual in­come of 120,000 yuan or more is re­ally high in China to­day. Since the av­er­age an­nual in­come of Bei­jing wage-earn­ers last year was 85,038 yuan, peo­ple rightly as­sume an in­come of “120,000 yuan or more” is not high.

How­ever, China is a large na­tion with huge re­gional dis­par­i­ties. China’s ru­ral pop­u­la­tion is more than 600 mil­lion, in­clud­ing more than 50 mil­lion im­pov­er­ished peo­ple. In a coun­try where the per capita an­nual dis­pos­able in­come was only 21,966 yuan in 2015, an an­nual in­come of 120,000 yuan or more is def­i­nitely high.

The con­tro­versy over the def­i­ni­tion of the “high-in­come group” re­flects the anx­i­ety of China’s ris­ing middle class. Those who have strong opin­ions on this is­sue are more likely to be fre­quent in­ter­net users with keen in­ter­est in ad­just­ments to in­di­vid­ual tax norms. In other words, they def­i­nitely do not be­long to the low-in­come group. Peo­ple with re­ally low in­come strug­gle to make ends meet and don’t know what hap­pens on the in­ter­net, let alone de­bate the is­sue in cy­berspace.

But the middle-class in the for­ma­tion shouldn’t take blame for the wealth gap, and they

have full rights to de­fend their in­ter­ests by ex­press­ing their opin­ions. In this con­text, quick and strong re­sponse is not only de­sir­able but also a good thing for pol­i­cy­mak­ing. The strong public re­ac­tion to the may-not-be-true in­for­ma­tion shows peo­ple lack the nec­es­sary sense of gain and se­cu­rity de­spite the com­par­a­tively high salary they earn. It is also true that the heavy eco­nomic bur­den ow­ing to the ris­ing day-to-day ex­pen­di­tures of in­di­vid­u­als— such as high rents and hous­ing loans— make the an­nual in­come of 120,000 yuan a year just enough for some res­i­dents in big cities to make ends meet.

The cen­tral gov­ern­ment, how­ever, has de­cided to ex­pand the middle-in­come group as part of its strate­gic goal. The au­thor­i­ties in charge of re­form­ing the in­di­vid­ual in­come tax rules sys­tem should take peo­ple’s liv­ing ex­penses into con­sid­er­a­tion be­fore in­creas­ing taxes.

More­over, the pol­icy ask­ing peo­ple who earn 120,000 yuan a year or more to vol­un­tar­ily de­clare their in­comes was im­ple­mented in 2006 when Chi­nese peo­ple’s an­nual dis­pos­able in­come was only 11,759 yuan, but the per capita dis­pos­able in­come has al­most dou­bled in the past decade. And the cost of liv­ing in­creases even more in both ur­ban and ru­ral ar­eas, yet the 120,000 yuan bench­mark hasn’t changed. This calls for a se­ri­ous de­bate on tax­a­tion stan­dards.

In­di­vid­ual tax re­form, there­fore, re­quires com­pre­hen­sive and all-round con­sid­er­a­tions, be­cause it re­lates to a ma­jor­ity of peo­ple’s in­ter­ests.

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