Tax on gifts of mooncakes is leaving a bitter taste
By Yang Jian |
August 29, 2011, Monday
|
Print Edition
Print Edition
The approach of the Mid-Autumn Festival has reignited debate about China's "mooncake tax."
Despite the tax having been levied for the past two years, grumble about the tax is growing as the festival nears. It falls on September 12 this year.
In 2009, the State Administration of Taxation stipulated that some allowances enjoyed by employees, including the mooncakes they receive from employers every year, would be subject to tax.
Tax authorities in Shanghai, Beijing and Nanjing recently reminded employers that the price of the mooncakes, a traditional food for the Chinese festival, should be included as part of the monthly salary of employees to calculate the tax they should pay.
The Beijing tax body even reminded companies that any company failing to do so would be fined up to three times the tax evaded by non-declaration of mooncakes.
In Shanghai, a staff member answering the city's 12366 taxation hotline stressed: "It is not a new rule at all." He said the stipulation was reasonable because the state tax body listed salary, allowances and bonuses as taxable income for individuals whether in cash, coupons or goods.
Traditional culture
However, most taxpayers think the rule is ridiculous and there has been a wave of online criticism.
More than 96 percent of Chinese employees said the tax body should impose no tax on mooncakes, according to an ongoing poll on weibo.com.
"Mooncakes are different from other allowances, because they are also a symbol of gratitude and encouragement to employees in the Chinese traditional culture, which should not be taxable," said Wang Yi from the Beijing Folk Custom Association.
Strictly speaking, based on relevant tax law and regulations, cash and non-cash income or benefits employer pays or provides to local employees should be taxable except the monthly tax-exempt amount and statutory social security contributions, said Freeman Bu, a tax partner in an accounting firm Ernst & Young Shanghai.
In an ideal and fair situation, everything is paid in cash by employer to employee and tax is paid based on relevant law and regulations, he said.
However, when mooncakes such as those in luxury wrapping are very expensive, employees may consider the price overstated, and accordingly they may be unwilling to pay tax based on the high price, he added.
"When it happens that certain other benefit items such as various coupons, commercial cards and physical goods such as rice and eatable oil offered by employer to employees are not strictly taxed, employees may consider unfair when they are taxed on mooncakes, a comparatively low-price item," Freeman said.
The tax raised on mooncakes was a drop in the ocean as far as the country's tax revenue was concerned, and only increased the burden on middle and low income employees, said Vincent Zhi, a senior manager of accounting firm Deloitte Touche Tohmatsu.
He said the tax was in direct opposition to the country's decision to raise the personal income tax threshold to 3,500 yuan (US$539) from 2,000 yuan from Thursday.
Despite the tax having been levied for the past two years, grumble about the tax is growing as the festival nears. It falls on September 12 this year.
In 2009, the State Administration of Taxation stipulated that some allowances enjoyed by employees, including the mooncakes they receive from employers every year, would be subject to tax.
Tax authorities in Shanghai, Beijing and Nanjing recently reminded employers that the price of the mooncakes, a traditional food for the Chinese festival, should be included as part of the monthly salary of employees to calculate the tax they should pay.
The Beijing tax body even reminded companies that any company failing to do so would be fined up to three times the tax evaded by non-declaration of mooncakes.
In Shanghai, a staff member answering the city's 12366 taxation hotline stressed: "It is not a new rule at all." He said the stipulation was reasonable because the state tax body listed salary, allowances and bonuses as taxable income for individuals whether in cash, coupons or goods.
Traditional culture
However, most taxpayers think the rule is ridiculous and there has been a wave of online criticism.
More than 96 percent of Chinese employees said the tax body should impose no tax on mooncakes, according to an ongoing poll on weibo.com.
"Mooncakes are different from other allowances, because they are also a symbol of gratitude and encouragement to employees in the Chinese traditional culture, which should not be taxable," said Wang Yi from the Beijing Folk Custom Association.
Strictly speaking, based on relevant tax law and regulations, cash and non-cash income or benefits employer pays or provides to local employees should be taxable except the monthly tax-exempt amount and statutory social security contributions, said Freeman Bu, a tax partner in an accounting firm Ernst & Young Shanghai.
In an ideal and fair situation, everything is paid in cash by employer to employee and tax is paid based on relevant law and regulations, he said.
However, when mooncakes such as those in luxury wrapping are very expensive, employees may consider the price overstated, and accordingly they may be unwilling to pay tax based on the high price, he added.
"When it happens that certain other benefit items such as various coupons, commercial cards and physical goods such as rice and eatable oil offered by employer to employees are not strictly taxed, employees may consider unfair when they are taxed on mooncakes, a comparatively low-price item," Freeman said.
The tax raised on mooncakes was a drop in the ocean as far as the country's tax revenue was concerned, and only increased the burden on middle and low income employees, said Vincent Zhi, a senior manager of accounting firm Deloitte Touche Tohmatsu.
He said the tax was in direct opposition to the country's decision to raise the personal income tax threshold to 3,500 yuan (US$539) from 2,000 yuan from Thursday.
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