BIZCHINA / Opinions
Consumption levy remains a taxing issue
(China Daily)
Updated: 2006-03-24 06:36
The Ministry of Finance (MOF) and the State Administration of Taxation
(SAT) announced on Tuesda
BIZCHINA / Weekly Roundup
Taxing time
By JIANG JINGJING (China Daily)
Updated: 2006-03-31 09:42
Li Jie, an office worker at a multinational company in Beijing, has
visited a number of high-end watch stores recently, because she plans to
spend six months of her savings on her first luxury timepiece.
She is not actually going to buy anything in the nation's capital,
however. At the moment she is simply studying the market for information
on models and prices. She will make her eventual purchase in Hong Kong,
where she will travel with her boyfriend later this year.
"It is much cheaper there (in Hong Kong), so there is no reason to spend
more money here," Li says.
Mainland customers have long seen Hong Kong as the best place to buy
luxury watches, due to the larger selection of products and much lower
taxes.
This situation will be further reinforced starting next month, when China
will impose a consumption tax of 20 per cent on watches selling for more
than 10,000 yuan (US$1,245.33).
An official with the Ministry of Finance says that some luxury watches
use expensive metals, and often feature precious stones and diamonds.
This goes beyond the standard definition of a timepiece.
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Chinese Mandarin
y consumption tax adjustments starting from
April 1. The Chinese media have given much attention to this reform. Here
are excerpts of comments from the press:
Oriental Morning Post: The latest consumption tax reform is expected to
adjust consumption habits.
It helps regulate energy usage, protect environment by reducing the
exploitation of timber resources, and narrow the gap between the poor and
the rich by collecting a consumption tax on luxury items.
The taxation reform is a positive move. But some points should be
highlighted for better implementation.
The major purpose of consumption tax adjustment should not be increasing
fiscal incomes, as value-added tax should be the major source of fiscal
incomes. To emphasize this is to prevent blind enlargement of the
consumption tax regime in the future.
Consumption tax is a levy on consumption, not on production. The essence
of consumption tax is redistribution of a certain part of social wealth.
Government-led social wealth redistribution should be based on fairness.
The tax incomes should be used for special programmes. The aim of
consumption tax imposed on disposable wooden chopsticks is to protect
forest reserves. So the consumption tax incomes in this industry should
go back to the protection of forest resources.
If the input into protection remains the same after the implementation of
consumption tax, we can hardly call it a success to tax disposable
chopsticks.
The adjustment of consumption tax has just started. It is acceptable to
make future adjustments according to reality. But the correct principle
and the basic aim should not be forgotten.
Beijing News: The consumption tax reform should be aimed at fairer
distribution of social resources.
The main target of the latest adjustments on consumption tax is to guide
consumption, adjust income distribution, and promote protection of
environment and resources.
It is important to adjust income distribution. The State should build
proper systems to improve the welfare of all members of society. Taxation
is a major system to realize the aim. It is an economic issue as well as
a political one.
There are some problems existing in the current consumption tax system,
which was introduced in 1994. The regime of taxation is narrow. Some
then-luxury goods are widely consumed by today's public. The tax rates of
some items should be adjusted according to the changes of domestic
industrial structures, consumption levels and structures. The functions
of promoting resources saving and environmental protection should be
enhanced.
To adjust income redistribution through taxation shows the government's
orientation of values as well as the public's interests. The government's
human-centred concept of administration should also be realized through
the function of redistribution.
To optimize distribution of resources is a major aim of this reform too.
The State's industrial policy to develop eco-friendly, resource-efficient
enterprises with high added value can also be improved through taxation
leverage. The adjustment of tax rates demonstrates the government's
determination to solve the current socio-economic problems.
It is expected that taxation can play a vital role in the country's
macro-economic management.
Yanzhao Metropolis Daily: The adjustments on consumption tax items and
rates conform to the current socio-economic situation in our country. But
from the legal perspective, it is still unfortunate that administrative
departments like the Ministry of Finance and State Administration of
Taxation decide tax adjustment policies.
Legislative power belongs to the legislature. Taxation is an issue of
citizens' property rights. An adjustment on taxation is the
redistribution of citizens' interests and obligations. The necessary
procedures according to the modern democratic system should be: people's
representatives express their ideas and suggestions to the legislature
for discussion and review to reach a consensus and form a legal document.
A taxation arrangement attained through such a process is democratic and
lawful.
The slowness in taxation legislation is a huge regret.
Consumption tax is closely connected with public interests. But the legal
basis of its collection is only a provisional regulation issued by the
State Council in 1993. It is just an administrative regulation, which is
below laws made by the National People's Congress (NPC) and its standing
committee.
The provisional regulation has not been revised or upgraded in the past
13 years. The adjustments of consumption taxation this time were not made
by the State Council, but by the MOF and SAT.
To adjust public interests without widely soliciting public opinions, no
matter how fair or just it is, is regrettable.
It is essential to upgrade taxation legislation to build a democratic
society ruled by law.
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