Chinese Government To Raise Revenue By Targeting High Income Groups

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

15 August 2001

The Chinese government and the country's municipal and city authorities are looking to high income individuals to raise additional tax revenue, it was revealed recently. Both local and central authorities are facing lean times ahead; as the government attempts to bail out failing banks and state-owned firms and to deal with the needs of laid-off workers, the local authorities have found themselves abruptly cut off from central government subsidies.

As a result, they have decided that the most effective way to beef up tax revenue is to make sure that those citizens who are supposed to be paying the most are actually doing so, meaning that high income earners have come under the spotlight. Earlier this month, the Beijing Local Tax Bureau announced that it would be targeting the nine sectors cited by the State Administration of Taxation as 'high income industries' for especial scrutiny. These include: financial service providers, telecoms, property developers, professional soccer clubs, foreign invested businesses, high class hotels, entertainment establishments, and law and accounting firms.

If individuals falling into any of these categories are found to be evading or underpaying income tax, the authorities announced, taxation agencies will first employ the softly-softly approach, investigating their employers, or the company that they own, and urging them to 'self examine' with a view to reform. However, should corrective action fail to be taken, the individual themselves will then become the subject of an investigation.

However, despite the release of the SAT's nine categories, there is still some confusion as to the definition of a 'high income' citizen, as not all employees working in the targeted industries are wealthy. Other, provisional benchmarks bandied around by experts have included 'having an annual personal income of at least 30,000 yuan (approx US$3,623) and owning a house and car', and 'having a personal income of at least 60,000 yuan (approx US$7,246) a year'.

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