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What coal bosses and landlords have in common: tax rip-offs
By Wang Yong |
May 6, 2011, Friday
|
Print Edition
Print Edition
COAL, cars, sandstorms and taxes.
These four words describe two of China's major economic problems: environmental pollution and income inequality.
As my colleague Ni Tao argues in today's lead opinion article, the sandstorm that smacked Shanghai late last week and early this week had traveled across coal-rich regions in northern China and brought with it a "weapon of mass pollution": coal dust.
Anyone familiar with the stories or rather the scandals of China's coal industry knows how private coal mine bosses have exploited both nature and workers to get super-rich overnight. They have been buying luxury cars, villas and fancy clothes with bags of cash - a big chunk of which should have been taxed.
These private coal mine bosses evade tax in the crudest way: they send workers down dangerous shafts for over exploration and mining. If their registered output is only 10 tons, they will go all out to produce 100 tons. In this way, through grotesque lapses in safety, workers perish in mine blasts while the bosses get 90 tons tax-free.
Coal bosses, as they are famously known, have thus got rich first - ahead of most wage earners who toil and sweat for modest or meager pay - at the expense of the environment and state tax coffers.
China's latest efforts to reform its personal income tax law - which has a noble purpose of taxing rich guys more and poor guys less - has failed miserably to catch the ill-gotten gains of the super-rich.
Coal bosses are just a few of the whales that swim outside the tax net. Landlords are another. For seven consecutive years, I have paid my rent without receiving an invoice from any of my landlords.
Even if I did get an invoice, I would have had to cover the rental tax myself. Even if my landlords had to pay the rental tax, it was just a flat 5 percent of their rental income, far less than the highest marginal tax rate of 45 percent for personal income - which is now proposed in an amendment to the country's law on personal income tax.
In Shanghai and Beijing, it's not rare to see rich guys rent an apartment for 10,000 yuan (US$1,540) a month. In that case, the landlord would pay 500 yuan in tax only. By contrast, someone with a monthly salary of 10,000 yuan would - under the newly proposed tax law - pay 1,400 in tax (20 percent for the taxable amount of 7,000 yuan).
No wonder Li Daokui, professor of management at Qinghua University and an adviser on monetary policy to the central bank, has lambasted the personal income tax - before or after the proposed amendment - as something akin to a "salary tax," meaning it mostly taxes wage earners while largely letting go of those who make a fortune out of property or capital appreciation.
Certainly, the proposed amendment to the personal income tax law- now subject to public comments through May 31 - has lowered wage earners' tax burden somewhat, by raising the amount of tax-exempt income from 2,000 yuan to 3,000 yuan a month.
If official statistics were correct, a jump to 3,000 yuan would represent a bona fide gift from the government to the people.
Our national statistics guys say that 3,000 yuan would be more than enough to cover the basic expenditure of an average urban Chinese per month - on food, clothes, housing and transport.
In particular, the statistics officials say, we Chinese urbanites each spend only 111 yuan on housing every month. If that was correct, I could have easily saved 40 times or more than I actually did. I could have afforded a luxury car, as do landlords and coal mine bosses.
These four words describe two of China's major economic problems: environmental pollution and income inequality.
As my colleague Ni Tao argues in today's lead opinion article, the sandstorm that smacked Shanghai late last week and early this week had traveled across coal-rich regions in northern China and brought with it a "weapon of mass pollution": coal dust.
Anyone familiar with the stories or rather the scandals of China's coal industry knows how private coal mine bosses have exploited both nature and workers to get super-rich overnight. They have been buying luxury cars, villas and fancy clothes with bags of cash - a big chunk of which should have been taxed.
These private coal mine bosses evade tax in the crudest way: they send workers down dangerous shafts for over exploration and mining. If their registered output is only 10 tons, they will go all out to produce 100 tons. In this way, through grotesque lapses in safety, workers perish in mine blasts while the bosses get 90 tons tax-free.
Coal bosses, as they are famously known, have thus got rich first - ahead of most wage earners who toil and sweat for modest or meager pay - at the expense of the environment and state tax coffers.
China's latest efforts to reform its personal income tax law - which has a noble purpose of taxing rich guys more and poor guys less - has failed miserably to catch the ill-gotten gains of the super-rich.
Coal bosses are just a few of the whales that swim outside the tax net. Landlords are another. For seven consecutive years, I have paid my rent without receiving an invoice from any of my landlords.
Even if I did get an invoice, I would have had to cover the rental tax myself. Even if my landlords had to pay the rental tax, it was just a flat 5 percent of their rental income, far less than the highest marginal tax rate of 45 percent for personal income - which is now proposed in an amendment to the country's law on personal income tax.
In Shanghai and Beijing, it's not rare to see rich guys rent an apartment for 10,000 yuan (US$1,540) a month. In that case, the landlord would pay 500 yuan in tax only. By contrast, someone with a monthly salary of 10,000 yuan would - under the newly proposed tax law - pay 1,400 in tax (20 percent for the taxable amount of 7,000 yuan).
No wonder Li Daokui, professor of management at Qinghua University and an adviser on monetary policy to the central bank, has lambasted the personal income tax - before or after the proposed amendment - as something akin to a "salary tax," meaning it mostly taxes wage earners while largely letting go of those who make a fortune out of property or capital appreciation.
Certainly, the proposed amendment to the personal income tax law- now subject to public comments through May 31 - has lowered wage earners' tax burden somewhat, by raising the amount of tax-exempt income from 2,000 yuan to 3,000 yuan a month.
If official statistics were correct, a jump to 3,000 yuan would represent a bona fide gift from the government to the people.
Our national statistics guys say that 3,000 yuan would be more than enough to cover the basic expenditure of an average urban Chinese per month - on food, clothes, housing and transport.
In particular, the statistics officials say, we Chinese urbanites each spend only 111 yuan on housing every month. If that was correct, I could have easily saved 40 times or more than I actually did. I could have afforded a luxury car, as do landlords and coal mine bosses.
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