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Home >> China
UPDATED: 15:23, September 02, 2005
Scholar suggests more tax types over rich groups
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When all sides are enthusing about raising the threshold for the payment of personal income tax, Professor Wang Kangmao from the Business School of East China University of Politics and Law suggested opening new consumption tax types over rich groups in an effort to improve the nation's fiscal system.

China's current tax base is not broad enough, Wang told reporter. Internationally popular tax types, such as betting duty, tobacco duty and gasoline tax, have not been opened in China. These are taxes over richer groups and will not affect average income people.

Engaged in studies over China's fiscal system since 2001, Professor Wang has been advocating higher threshold of personal income tax, cancellation of interest tax and reduction of enterprise income tax.

Wang showed reporter his fiscal model, carefully designed on the basis of 1997-2000 fiscal data of the Chinese mainland as well as China's actual conditions. According to this model, tax-cut schemes, including raised personal income tax, reduced enterprise income tax and the shift from "production VAT" to "consumption VAT", will result in a loss of 85 billion yuan in tax revenue, but will gain 371 billion yuan through the collection of taxes on luxury consumption, betting and gasoline. These new tax types are not only of stable sources, but can help reduce some immoral or environment-damaging behaviors since they mainly target rich groups. "Many rich people don't depend on salary for income, so it's technically difficult to collect this part of tax. Then collect when they are spending. They earn so much and they have to spend, don't they?"

The international average tax rate for rich people is 50 percent, Wang pointed out, or higher to 60 percent. He believes his fiscal model can not only release to some extent the taxation burden on enterprises and ordinary people, but can open new, stable tax sources and stimulate economic expansion. Its contribution to GDP is estimated at 2.6 percent, meanwhile 286 billion yuan of tax revenue can be increased.

The raised threshold of personal income tax is a signal demonstrating central leadership's concept of "putting people first", said Wang. Top policy makers of the state have expanded their care from disadvantaged groups to people on a salary of 1,500 yuan, who take 70 percent of the total population.

The government simply cannot stay idle before the trillions yuan of fiscal revenue the state has accumulated, but should become a bright money manager to produce more money, Wang noted. The key is to promote the concept of "money management by state".

Wang suggested dividing the country's 700 billion US dollars foreign exchange reserve into two parts, one for keeping the yuan stable and the other for investing in foreign blue chip. Meanwhile, we can learn from Singapore by setting up state-controlled investment companies to invest in the industrial sectors of some developing countries.

By People's Daily Online

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