Interview: How Is 'the Wealthy Evading Duty' to Be Handled?

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Last updated at: (Beijing Time) Tuesday, August 27, 2002

Interview: How Is 'the Wealthy Evading Duty' to Be Handled?

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On people's lips in China of late is a wide topic over income tax dodging by the wealthy and "a far less income tax amount" they have paid during a recent period. With this in view, an interview was thus sought with a related responsible person from the State Administration of Taxation (SAT) to clarify the point about the work how China's income taxation is to be managed and strengthened.

Q: "A far less income tax amount" by the wealthy is a socially vexed problem to the Chinese public. How do we take up this problem? And what measures are our taxation offices going to adopt?

A: Seen during a recent period is a wide media coverage over "a far less income tax amount" by the wealthy in China. In my opinion, we still have to stick to the practical method of "seeking facts from truth" in the way concrete analysis should be made of a specific matter in handling the problem.

First, since the launching of reform and opening-up, the Party and the state have the policy formulated granting a number of people the right to get rich first and then help achieve common prosperity alongside their counterparts. May people have by using their labor, wisdom, skill and capital on various business or manufacturing lines become high-income earners turning over tax returns to the state according to law. But there are still found some high-income earners taking up illegal business and income tax dodging.

Second, complicated historical causes have given rise to income gaps of people. The primary cause lay in a confused institutional setup short of an efficient mechanism governing overall distribution, calling for new readjustments to be made to put to right past income distribution order and a new mechanism in its place.

Third, high-income earners are made to pay income taxes has been an important part to the whole of our personal income revenue in regulating the overall income level of people. Over the years a lot of work has been done and great achievements have been made to that end. But our country's personal income taxation's regulatory role, scope and power are still on a limited scale. This is especially so for lack of a comprehensive sound taxation system, not to say a full role to be played by income taxation.

Q: Income taxes from wage earners take about 40 percent of our personal income revenue, is this a normal percentage?

A: A somewhat higher percentage according to some people. In my opinion, factual analysis should be made of the problem.

First, our personal income revenue are chiefly from income taxes of urban citizens. For the present people have their personal income mainly from salaries as the largest social community of our taxpayers. The largest part of our revenue is from personal income taxes of these wage earners and things must make no difference of this in foreign countries. Wages form the biggest income tax source of our personal income revenue. According to some specific documents released in recent years, we have given back in our country about 50 percent of our output value to people in the form of wages as remuneration for their labor. Income from salaries makes up about 80.4 percent of the disposable income of urbanites in China.

Second, a speedy rise has been seen in people's salaries along with an increased number of taxpayers in recent years. A high tide inevitably pushes up a ship. Statistic analyses show that since 1994 following a continuous pay raise salary earners as taxpayers had grown to over 60 million persons/times in 2000 from 9.565 million persons/times in 1994. Especially in coastal areas in China's east, with a developed economy, a weighty part of income has come to be drawn from salaries augmenting the percentage of personal income taxes throughout China. This is as shown by a percentage of over 60 percent of personal income revenue by people.

Third, salary income taxes are chiefly from high-income earners. According to sample investigations conducted in Beijing, Shanghai, Guangdong, Jiangsu, Hubei, Sichuan and Shaanxi, out of income taxes from salaries taxpayers are up to 57.2 percent with a tax rate of over 15 percent and an annual income of around 36 thousand yuan. This is why in China's personal income revenue from salaries take up around 40 percent being at a level of people's income structure and our economic advances made. In the meantime, it must also be noted that there still remain many loopholes in our taxation management. There still remains much to be done in further strengthening the management of our personal income taxation. In short, every bit of duty on personal income should be collected.

Q: It is said that personal income taxation has become one among the four major tax categories of China. How is the present state of things with the collection of personal income taxes?

A: Personal income taxation, as demanded by a situation of reform and opening open, began back in September 1980. It has been now 23 years past. There has already been a speedy year-on-year increase in our revenue from personal income. Of this, a total of over 99.6 billion yuan in 2001 from 4.682 billion yuan in 1983 had been netted, registering an annual growth of 11.8 billion yuan over our economy and as a tax category that has experienced the speediest growth amongst the others in China.

By People's Daily Online

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