Could China's richest be the tax cheaters?
By Echo Shan (chinadaily.com.cn)
Updated: 2005-09-13 11:43

Are private business moguls touted on the Forbes list as the nation's most wealthy actually paying their fair share of taxes? Not if a survey conducted jointly by the State Administration of Taxation and China Tax Magazine is correct.

The findings reveal a puzzling ratio of 200:13 in regard to those on the list, and those actually paying taxes matching their listed wealth. Among the Forbes-selected "most-moneyed" 200 magnates a mere 13 appear at the top notch of the taxpaying charts in China.

That's up from the 2004 survey when the number was at 12.

A reasonable assumption among the ordinary public is that tax evasion by the wealthy is rampant in China, ranging from private enterprise owners to wealthy pop stars that may not be paying the State what they truly owe.

In the face of a flurry of inquiries, Zhang Musheng, China Tax Magazine editor in chief, was quoted by the Beijing-based newspaper China Youth Daily as saying "business magnates should hold a proper outlook toward paying their taxes."

Zhang said some key measures in the way taxes are now levied are "outdated," which fail to effectively collect taxes from the rich.

Yet some Chinese nouveau rich have developed new awareness in recent years toward openness in paying their fair share of taxes, even offering to publicize the sums they have given to the national treasury.

"You can trace it back to 2001 when the survey was initiated, when quite a lot of business people firmly refused to reveal their tax-related information," Zhang explained, adding that nowadays many chose to open their books to build honest corporate images for all of society to see.

Zhang's remarks are echoed by the Chinese Academy of Social Science expert Gao Peiyong, who seemingly downplayed the notoriety that is aimed at the "super haves" in society.

"It's not solely the rich who are at fault. The nation's tax system should also be reconsidered," said Gao.

According to Gao, there are mainly three forms of the moneyed class: First, those who earn much more than others; second, those who spend more; and, those who hold more property.

The current tax system seems to be flawed when it come to property. It leaves loopholes to wealthy businessmen who lead a frugal personal life with much of their wealth invested in property, which is not currently covered by Chinese tax policy, explained Gao.

The rate-paying policy should be based on myriad factors, such as buying power and income levels, Gao said. China is now mulling the property taxes in the hopes of digging down in the pockets of the rich and shortening the widening divide between its rich and poor.

In the same breath China is expected by the end of the year to raise the threshold for personal income tax from the present 800 yuan (US$99) to 1,500 yuan (US$148) or higher to allay the tax burden for salary earners.

Economists claimed China's rich have the smallest tax burden in the world.

According to researcher Ni Hongri from the State Council Development Research Centre, salary earners rank first among China's tax-payers, because collecting taxes from them is far easier as employers debit tax straight from salaries.

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