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China Plans to Levy New Social Security TaxChina is expected to levy a new tax to raise funds for increased spending on social security, the Business Weekly of China Daily reported Sunday.Despite debates within related ministries including the State Development Planning Commission, the State Administration of Taxation and the Ministry of Labor and Social Security, authorities have pushed the decision through because existing mechanisms are inadequate to provide sufficient funds to meet social security needs, including the needs of those expected to be laid off from the State-owned enterprises this year, insiders said. Chinese enterprises have yet to pay 38 billion yuan (4.6 billion US dollars) in overdue pension payments under the current system, statistics from the Ministry of Labor and Social Security indicated. The shortfall, economists said, poses a threat to the normal operations of the social security system. "The decision has been made, although it is still controversial, " and details of the new social security tax have yet to be worked out, the Business Weekly quoted a source with the Ministry of Labor and Social Security as saying. Controversies over such a new tax have been focusing on whether the proposed tax should replace existing fund-collection mechanisms or simply supplement them. Disputes also exist as to whether the social security system, as social insurance, should be limited to medical care, unemployment or retirement coverage, or be expanded to cover losses in other areas such as those resulting from natural disasters. It would be much easier to enact a new tax to supplement funds from the existing fee-collection system for social security needs rather than to replace them, insiders said. Ji Jinbiao, associate professor with the Central University of Finance and Economics, said, "Taxation is the most effective way to raise necessary funds for social security programs." He added that a levy of a social security tax could give strong legal support to fund raising, make collections constant, unified and uniform across the country and in diverse entities. More importantly, proceeds from the tax could be better protected from misappropriation because such funds will be used with supervision from fiscal departments and accounting agencies, Ji said.
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