China’s tax rebellion?

The following is from last week’s Economist. I thought it interesting because I have always thought that if the middle classes in China object to CCP rule, it will be over things related to money and luxuries – tax is therefore a key issue.

China’s tax system: Return to sender

The well-to-do in China have snubbed their government. This year for the first time, anyone earning more than 120,000 yuan ($15,500) annually is supposed to file a personal income-tax return. Yet by the deadline of April 2nd (extended by a couple of days because of low compliance), only a small minority had done so. Threats of massive fines have gone unheeded.

The problem facing the Chinese government is that they need to get more revenue from people that avoid paying full tax on their earnings, especially given the population will continue to age and more pressure will be created for them to be cared for (their children are already becoming less willing to look after them personally). The abolition of the agricultural tax and other initiatives to try to “pay off” the rural poor has also led to increased pressure on government budgets.

However, as the Economist points out, a lot of Chinese will ask why they should pay all their taxes when they get little or nothing in return from the State – they can’t even elect it.

But very few bother to pay personal income tax unless it is deducted automatically. As some Chinese newspapers have pointed out, this is partly because many Chinese believe they get little in return for their taxes. They have to pay through the nose for health care and for decent education for their children. They are also resentful that few officials pay tax, even though many have big incomes from shady dealings.

Even the words “no taxation without representation” have found their way into print, in an article in the Information Times, a government-owned newspaper in the southern city of Guangzhou. Noting that half of the delegates to China’s legislature were officials, the newspaper reported that commentators had pointed out that the parliament should have “fewer officials and more taxpayers”: an interesting distinction suggesting the taxman has struck a raw nerve.

“No taxation without representation” – is that a phrase that could be heard more and more in the future in China?

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Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.

The Discussion: 20 Comments

Nobody likes paying tax, no matter where they live and/or work, but China is a different story. Why pay tax?
If you need a doctor, you have to pay – in hard cash. Don’t even dream about turning up at a Chinese hospital with an open wound and not enough money on you. They’ll just watch you bleed to death.
If you want to send your kids to school, you pay for it, the more you can afford the better the education of your children.
If you want to use a highway – again, you pay for it.
The police – well, they are mainly there for bullying people. You better make sure you don’t have to deal with them. If you are in urgent need of help, don’t call 110, better call a friend. There are some good people left out there in the Middle Kingdom.
Fire brigades – don’t even get me started on that!

April 19, 2007 @ 11:28 pm | Comment

Oh and dont forget all the money they have to pay to keep Falun Gong practitioners in brainwashing centres. There were 100 million of them before 1999 and now where are they? Oh yeah, they are selling their organs to make the money back…

And the money the CCP needs to spend to keep the people stupid and scared, thats a lot. The Chinese people arent naturally that stupid so its quite a big project. The CCP needs to build united fronts all over the world so that information can be manipulated to suit the party line even outside China. The party has to give benefits all over the world to media etc so that they follow the CCP propaganda.

And dont forget spies, the CCP needs spies so that it can try to hold onto power by inciting hatred and restraint on whoever it happens to be afraid of.

The CCP has persecuted brutallyt over half the Chinese people, now it is doing the terrible deed on Falun Gong, so the CCP needs to spend sooo much money to cover up it’s crimes. Thats what the great firewall is for for example. So taxes, yeah no doubt they want the Chinese peoples money to cover up their crimes-they’e evil.

April 19, 2007 @ 11:44 pm | Comment

Isn’t hujintaos official salary only 3,500 yuan a month?

April 20, 2007 @ 12:38 am | Comment

I guess nowadays Economist should call themselves Politician.

Nobody likes to pay tax and China barely seriously collects personal income tax before. The government revenue was used to come from revenue of state owned companies and tariff. Nowadays the government revenue mainly comes from corporate tax and debt. Right now they try to reduce domestic corporate tax and collect more personal income tax, just like every other countries do. Thats it. The agricultural tax takes a very small portion in the government revenue actually.

Do people like this? Of course not. Even in US, there is some extremists such as Tax Protest Movement.

BTW, I have nothing to say about Lunzi. May God let them rot in hell.

April 20, 2007 @ 12:45 am | Comment

The cheapness of the chinese gov’t only makes the problem worse as it won’t hire more tax auditors or collectors and won’t pay them a decent enough salary to properly take care of their families. Oh, yeah, same goes for the police, fire and army.

Bribery is in part driven by greed, but also necessity.

And its not like paying your China taxes will mean an improvement in the quality of your tap water either.

April 20, 2007 @ 12:58 am | Comment

Funny, Every boss I ever had in China figured out a way to not pay taxes at all. The same thing happened when I sold two different properties. Everyone conspired to NOT pay ANY taxes or at best the very very least. I was always under the impression that the TaxMan was pocketing the taxes that we actually DID pay. Dunno.

April 20, 2007 @ 11:11 am | Comment

I paid my taxes. Do I get laowai representation?

April 20, 2007 @ 2:15 pm | Comment

I agree with you that taxation issues are bubbling in China and the resentment against the powerful essentially not paying anything will grow as China’s middle class grows. Positive Solutions recently did a very good post on taxes also: http://20six.co.uk/positivesolutions/art/7908886/China_s_problem_of_excessive_taxation

April 20, 2007 @ 10:36 pm | Comment

Interesting – thanks for the link, CLB.

The rich and powerful will always be better able to avoid paying tax, because they have the ability to move their money (and themselves) around. However I suppose that can be tolerated if one feels he/she has influence over governance.

The point made on PS about future flashpoints during economic difficulties is something I have always been concerned about. When government revenues decrease the tendancy is to increase taxes – I can image huge problems if that happened in China, not just because I don’t think the CCP would be able to cut spending in an intelligent way.

As maybe a bird of ill-omen, the BBC has reported there are new fears about the Chinese economy overheating…..

Chinese growth heating up economy

April 21, 2007 @ 2:57 am | Comment

Agreed – excellent article over at PS. Very informative.

I think I’ll take this isssue to my sophomores next week, which is sure to result in vibrant discussion and furrowed brows.

April 21, 2007 @ 11:56 am | Comment

I think that abolishing Agricultural Tax is actually sucessful. For one, many other fees are abolished with the Agricultural Tax, which is pointed out by officials several times.

Another thing, maybe you do not believe what the government said about the achievement (I am always suspicious myself). However according to the information that I collected from several independent sources, peasants pay far less to government nowadays, in some cases, pay little. My sample size is about 20-30. I am not sure it is the case everywhere. But it seems that in many rural areas that the situtation improved a lot.

April 21, 2007 @ 12:11 pm | Comment

Just curious- How many other laowei sign two contracts for their Chinese employers- the one that accurately outlines your pay and the one they show the Government?

April 21, 2007 @ 12:34 pm | Comment

Well, the ‘Report on China’s Peasants’ (published in English as WILL THE BOOK SINK THE WATER) claimed that despite the very low supposed tax rates for peasants, they were still regularly extorted by local officials. I’ve heard it’s gotten better in the last few years, but not by much.

I think they’ll take up tax farming in the next decade or so – subcontract it out to private firms, like the Ottomans!

April 21, 2007 @ 9:14 pm | Comment

fatbrick, maybe you misunderstand. A lot of people here welcomed the abolition of the agricultural tax.

The problem is that we soon found out local government had to find the lost revenue themselves – it wasn’t being paid for out of central funds, so that put pressure on other spending and taxation.

April 22, 2007 @ 8:08 am | Comment

@Ting Bu Dong
Some bosses not only manage not to pay taxes at all, they also put those taxes paid by their employees into their own pockets.

@LH
Are you sure those taxes you paid actually went to the tax authorities?

@Keir
I know of one school (“university”) where almost all the foreign teachers did. Is it possible that we are talking about the same institution? It’s called “Harvard of the East” by some people.

April 22, 2007 @ 8:19 pm | Comment

China has plenty of cash.

Well, enough to fund the world’s largest standing army, an advanced militray manned space program, a large nuclear stockpile (including ballistic missile submarines), and huge investments in offensive military hardware.

April 25, 2007 @ 8:14 am | Comment

“MyLawowai”

If China has plenty of cash, why can’t it afford to provide basic education, health services or pensions across the board?

Maybe it’s spending priorities are wrong, and it should stop the penis-envy competitions.

April 25, 2007 @ 5:28 pm | Comment

When you find out you would lose if there had been a war, you probably will spend some money on your defense.

April 26, 2007 @ 4:05 am | Comment

Mor-
I just work at an international high school, famed for being one of the most economical in Beijing. Not to be confused with any Ivy League Schools. I need to be convinced that we’re any more corrupt than others in town, although what our administration gets up to is completely shocking and I’ve been at this school for 5 years now.

April 26, 2007 @ 7:28 pm | Comment

Keir-
The institution I used to work for (it’s called a “university” in English) did it this way: starting from spring 2006, when I already was a teacher there, they asked all the new foreign teachers to sign two contracts, one accurately outlining the pay according to the teacher’s workload (as there was a constant shortage of teachers, some of us did up to 30 – 40 academic hours a week), the other the official government contract with a monthly salary of 4000 RMB. As a foreigner you don’t have to pay any tax, if your monthly income doesn’t exceed 4000 RMB. The funny thing is, all foreign teachers DID pay tax, including a foreign student who only worked there part-time (should I say illegally). And all of them obediently signed those two contracts, most of them without even asking questions. If they asked any questions, they were told: “This is the way things are done in China.” As I said, I had started working there a little earlier with a contract outlining the real pay which exceeded 4000 RMB because I did lots of classes. Right from the beginning I sensed that something was wrong, but my Chinese friends, family and so on kept telling me: “Don’t worry! As long as they don’t deduct too much money from your salary and you get a tax receipt where is no reason to look into this matter.” The trouble started when, during my second semester at the school, the administration wanted me to sign that second official 4000 RMB contract, too. I said that would only be possible if we canceled the first contract and discussed the conditions of a new contract, but they wanted to have both contracts, although they never were able to explain to me why. They gave me a lot of hogwash about this being a very complicated issue that foreigners don’t understand, then threatened me, later even phoned my wife and tried to make her talk me into it. As I was the only teacher who refused to sign a bogus contract and all my colleagues thought that everything was all right, my position was a rather awkward one. At the end of the semester, I picked up my last pay and just left the school. Later a Chinese lawyer (he works for one of those law firms recommended by foreign embassies) told me that I had done the right thing. Signing two contracts which obviously contradict each other means you are actively and deliberately taking part in a fraud. In this case the foreign teachers help their employer to put the “tax” they are paying in his own pockets.

April 27, 2007 @ 7:33 pm | Comment

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