China Readies Social Security Tax Plans

by Mary Swire, Tax-News.com, Hong Kong

21 March 2002

The Chinese media has reported that the state authorities are gearing up for the introduction of a new nationwide social security tax, in order to help the newly established social security system cope with the increasing number of elderly and unemployed Chinese citizens.

Under the country's dual taxation system, national taxes are collected by the state, and local taxes by regional governments. According to reports, Beijing has been making a study of the 17 provinces which already levy various social security taxes in order to discern the costs and practical issues involved.

According to the International Monetary News service on Tuesday, the state authorities have revealed that the average cost of collecting such taxes in the 17 provinces is just 2% of the monies collected, and accounts for a mere 1% in Shanghai, where more than 34 billion yuan was collected in 2001 in the name of retirement pensions, unemployment insurance, and medical insurance.

This has shown that the collection of such taxes on a nationwide basis is feasible, according to the International Monetary News.

However, before any new social security tax can be launched to deal with the country's increasingly aged population, which is reportedly growing at an annual rate of 3.2%, the relevant legislation must be drafted and approved, and an effective way of monitoring workers' income found.

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