Monday, October 25, 2021
Redistribution with tax reform
China’s top earners should “share cake”
China’s government wants to achieve “common prosperity” and reduce the gap between rich and poor. The aim is an “olive-shaped” distribution structure for income: broad middle, narrow ends. She wants to do it with a tax reform in which the rich give more, but without being “robbed”.
The Chinese state wants to ask top earners to pay more in the future. The government wants to “share the cake” by sensibly adjusting the incomes of top earners and increasing those of the lower income groups, as the official Xinhua news agency writes.
To this end, changes in tax collection are to be intensified in order to increase revenue. This will be done in a targeted manner as part of an effort to achieve “common prosperity” in the long term. The goal is therefore an “olive-shaped” distribution structure for incomes with a large middle and two small ends, according to the report. China’s tax policy should not be misinterpreted as “robbing the rich to help the poor,” according to the agency, which said it had questioned the relevant departments and relevant people about the plans.
Discussion about the introduction of a real estate tax
“Shared prosperity” is a political push by President Xi Jinping to narrow the gap between rich and poor. He has spoken out in favor of “vigorously and steadily promoting” a wealth tax. The introduction of a real estate tax is also under discussion. It is seen as a deterrent to speculative purchases and to cool property prices, which have soared more than 2,000 percent since the property market was privatized in the 1990s. This has made home ownership unaffordable for many Chinese.
At the weekend a body of parliament announced that it would introduce a property tax on a trial basis in some regions. “The announcement came earlier than expected and confirms our long-held view that China is determined to transform its real estate market,” said ANZ Research economist Betty Wang. A tax is likely to increase the cost of holding real estate assets, which could slow investors’ buying of existing properties. The shares of Chinese real estate companies fell more than three percent at the beginning of the week.