And Finally

Taxing times

How much do China’s middle classes pay in tax?

Taxing times

“Let me tell you how it will be/There’s one for you, nineteen for me,” sang the Beatles in their 1966 song Taxman. Britain’s most iconic band wasn’t happy with Prime Minister Harold Wilson, and his top tax bracket of 95%.

The Rolling Stones sided with the Fab Four – and they did something about it, becoming the world’s most famous ‘tax exiles’ and leaving the UK to avoid paying up.

He may not have penned any lyrics, but a member of China’s burgeoning middle class was making the news last month with complaints of his own about his tax burden.

The Southern Metropolis Weekly tells the story of Mr A (a pseudonym), and his struggle to find out just how many different taxes he was obliged to pay.

The answers he got from various state agencies were confusing to say the least. The Ministry of Finance put the number of taxes in China at 19, but the Beijing Local Tax Bureau said it was 25, and other departments put it as high as 30. “On an issue as important as the number of tax categories the authorities don’t have a unified view, which makes people inevitably question whether their tax bills have been messed up,” argues Mr A.

After a solid amount of research, Mr. A came up with his own conclusions.

He worked out that that he faced about 17 separate taxes – ranging from income tax, to value-added tax and even urban construction and maintenance tax. Along with his wife, he has a monthly household income of about $4,400 – putting them squarely in the middle class. At first glance the tax burden looks reasonable (their income tax is only 20% each). But once all the other fees are included Mr A estimates that more than half of their joint income goes to the state.

His calculations aren’t helped by the complexity of the tax system (“clearly unscientific”, the Southern Metropolis Weekly concludes). That very complexity even helps less diligent citizens than Mr A evade payment, say critics.

So is a rethink on the cards?

An overhaul of the system continues (more recently corporate tax rates were modified, to remove some of the incentives previously available to foreign firms). And the China Daily reports that middle-income households could see their own income tax cut in the current five year plan (starting this year).

Mr A will be pleased with that.

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