Blue moon

Why taxing mooncakes is causing a stir

Blue moon

Non-deductible and not great for waistlines: mooncakes

Last week police in the southern Taiwanese city of Kaohsiung called out the bomb squad. The suspicious package was cordoned off in a subway station toilet. TV pictures showed police officers in full protective gear approaching the scene with caution.

As it turned out, the package contained nothing but a box full of mooncakes, the pastries with sweet fillings traditionally eaten at the Mid-Autumn Festival, which falls on September 12 this year.

“Someone must have put it down in the toilet and forgotten it when they left,” said an officer, adding that police would continue to investigate (they can’t be very busy).

In China itself, the stodgy pastries have also been causing a bit of stir – and a little more explosively than in Kaohsiung.

The Legal Evening News was one of a number of newspapers to report that a local taxation bureau in Beijing was instructing that mooncakes, which many employers give to their workers ahead of the Mid-Autumn Festival, should now be considered as an in-kind benefit. And that meant that the cake was to be added to the taxable incomes of thousands of citizens.

Predictably enough, that didn’t go down well with mooncake lovers on the internet. A poll on Sina Weibo, China’s Twitter-equivalent, suggested that 96% of respondents resented the tax.

There were also concerns that the mooncake levy might bump plenty of people into a higher income bracket for tax.

Xinhua cited the case of Li Jingyuan, a white- collar worker making Rmb6,800 a month who currently pays Rmb720 of that in taxes. But once Li included his gift box of mooncakes in his monthly earnings, he found himself in the next bracket up, responsible for an additional Rmb300 in income taxes.

And that’s whether he likes mooncake or not! (WiC finds them rather doughy and certainly not tasty enough to justify the closer attention of the tax inspector.)

Li told Xinhua that he now prefers not to receive mooncakes as gifts in the first place.

Tax experts say the “mooncake levy” has actually been in place for years though most local tax authorities have not strictly enforced it. In theory, mooncakes have been considered part of bonus programmes and the government has every right to demand a tax on them, says the China Daily.

“But mooncakes are different from other allowances, because they are a symbol of gratitude and encouragement to employees in the Chinese traditional culture, which should not be taxable,” Wang Yi from the Beijing Folk Custom Association told the Shanghai Daily.

Whether the bad feeling resulting from the fuller imposition of the levy is worth the revenue it is generating is debatable.

But possibly, it might: mooncake sales run into billions of yuan annually, although much of that will not be classified as ‘in-kind’ payment from employers.

The risk is that public anger taps into wider discontent about taxation levels in general, says a commentary in Dazhong Daily, especially when local governments are not always seen to be doing a decent job in spending taxpayer funds.

“Of course, citizens in a modern society have 10,000 reasons to comply with tax laws. But the tax administrations also have 10,000 reasons to deliver a good service to the taxpayers,” wrote the newspaper from Shandong.

“Taxing society just for the sake of collecting tax and trying to do so on every possible occasion and in every possible way is unreasonable and emotionally destructive at the same time.”

At least the tax might reduce some of the waste surrounding the practice of giving mooncakes as presents. Every year, hundreds of tonnes of unwanted stodge have to be disposed of after the festival period.

“If a tax was imposed and fewer mooncakes were offered to employees, it could reduce excessive waste,” Zheng Xinye, a professor of the School of Economics at Renmin University of China, told the Global Times.

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