China may have been upbraided by the International Monetary Fund earlier this month for the lack of progressivity in its personal income tax regime – how ironic that a country run by communists has, according to the IMF, the highest level of income inequality in the world. However, in many other ways, China seems to be making good progress in adapting its tax system to the demands of today’s economy, including with proposals to improve tax incentives for scientific research.
Value-added tax has now been extended to all areas of the economy, and earlier this month, Chinese Premier Li Keqiang said that reform of the VAT regime would continue. VAT has already saved businesses an estimated CNY1.6tn (USD239.8bn) since its introduction, the Ministry of Finance said.
It was also announced recently that China is to allow foreign investors to defer tax on dividend income … Read More »
Just 20 years ago, had anyone suggested that China would become an economic powerhouse, people would likely have thought they’d lost the plot. A communist governed nation with a capitalist economy? Impossible!
Post-2008 financial crisis, when the developed West was contemplating how to pull back from the precipice not of recession, but depression, and one wonders quite how the world economy might have coped without China’s dragon-fired growth. This has created a strange dichotomy: China the superhero, helping to keep advanced economies from the jaws of dire austerity; and China the supervillain, accused of protectionism and worse.
Indeed, China looks to be increasingly comfortable grabbing some of the center-stage limelight, having delivered a confident speech at the annual Davos gabfest on how the country is looking outwards globally, as well as pushing ahead with leading negotiations on the Regional Comprehensive Economic Partnership. Is China … Read More »
China recently announced that it is lining up new measures to simplify a simplification, as it seeks a smoother roll-out of its new value-added tax system, which is replacing the complex business tax regime. But it remains to be seen whether the well-meaning intentions of state officials turn out to be a help or a hindrance to business.
It could also be said that China’s ongoing reforms have not been terribly effective. Otherwise it wouldn’t find itself in 137th place in the Paying Taxes index. Indeed, where China is concerned, company executives seem to think that the legal framework is becoming less predictable, if the results of PwC’s Doing Business in China survey are anything to go by. This found that businesses are more concerned about their ability to interpret regulations and anticipate costs, with only 12 percent of China/Hong Kong … Read More »
Although Hong Kong’s liberal economic system is regularly praised here, this Special Administrative Region of China, as it is officially known, has not been shown in the best of lights on the world’s television screens over recent weeks as the authorities, both in the SAR and in Beijing, struggle to square China’s One Party mode of government with the democratic demands of Hong Kong’s citizens. Another worrying, but little-reported development came in the form of figures from the Inland Revenue Department last week, which showed tax revenue growth slowing to a virtual standstill thanks to lacklustre economic growth in 2013/14. So, Hong Kong could do with a timely boost, and perhaps it has just got two: the launch of the Shanghai-Hong Kong Stock Connect scheme, which will allow eligible Mainland investors to trade stocks listed on the Stock Exchange of … Read More »
Writing for another publication not so long ago, an editorial colleague of mine suggested that Hong Kong was finished as a financial center. Well, actually, he didn’t go quite that far. But questions about Hong Kong’s place in the world at present and in the future, now it is nestled firmly in the bosom of communist China, are worth exploring. For a start, it seems incongruous that China should be creating more competition for Hong Kong by establishing financial centers in the mainland, notably Shanghai, where a new free zone for the financial services and investment, commodities trading, and logistics sectors have been created. Then there’s its rivalry with Singapore which has emerged as a regional investment and trading hub par excellence and voted the best place in the world to do business for the sixth year running by the … Read More »
This week there is a flurry of announcements of new or enhanced tax breaks for movie production, notably in China and California, which already had such incentives, and in independent Scotland, which didn’t, since it hasn’t existed since 1707, and probably never will again, although the UK does have such incentives. In fact, almost all countries, and sub-countries such as US States, have media production incentives, so one has to ask why? Even in the European Union such incentives are permitted, while many other types of tax break are frowned on or banned outright, although it’s true that the Commission normally insists on a “cultural content” test, i.e. your movie must have something Lithuanian about it, if you are shooting in Lithuania. And therein perhaps lies the explanation for the prevalence of such douceurs: they are part of nationalism, which … Read More »
In a week when international attention was focused, apart from the unavoidable World Cup, on the 25th anniversary of the Tiananmen Square massacre, commemorated this year as every year with a candlelight vigil in Hong Kong, it was praiseworthy of China to issue a “White Paper” lauding Hong Kong’s economic and financial achievements over the 17 years since it returned to Chinese rule. Of course, having Hong Kong on its doorstep is a massive advantage for China, which can use it as a free-market laboratory, as its own private “offshore” center, and as a source of investment funds via Hong Kong stock exchange listings. A slightly more cavalier commentator might wonder about the extent to which Chinese officials and quasi-state business operators might use Hong Kong as a laundry-basket for their wealth: without Hong Kong, they would find it far … Read More »
I don’t apologize for returning to the long-running craziness of anti-dumping duties, which can have no result but to hurt consumers. This week, it is serial offender the US Department of Commerce that is in the spotlight over specialty steels. There are a lot of numbers and a lot of countries involved, but we’ll just focus on one pair: the DoC is proposing an anti-dumping duty of 407 percent (no, there are no decimal points missing, it’s four hundred plus percent) on non-oriented electrical steel (NOES), whatever that might be, from China. And in case you think this is just an anti-Chinese rant, there is a 200 percent duty on Swedish companies, for good measure. To be clear, that means that if a Chinese company sells NOES to a Chicago manufacturer for USD2,000 a tonne, it will actually cost the … Read More »
In a masterpiece of diplomacy, China’s premier said last week that it was “open-minded” about the TPP (Trans-Pacific Partnership), which when you deconstruct it probably means that he is happy for Japan to wreck the chances of a successful TPP by refusing to negotiate on its rice tariffs (778 percent, as I recall). There is a double irony in this, given that Shinzo Abe is in reality quite willing to reduce the tariffs, but doesn’t need to play such a valuable card given that the US Congress has already ensured that there can be no further US trade treaties by refusing to allow the Trade Promotion Authority to be reconstituted, and that China on the other hand has been a willing player in the World Trade Organization. What actually puzzles me most is the question of why Japan was ever … Read More »
China announced a further package of tax cuts to benefit SMEs, extending previous reductions in income tax and VAT exemptions. That’s presumably good news for would-be businesspeople, although it’s difficult to tell from a distance how far Chinese entrepreneurs are tormented by bureaucrats, as is the case for small businesses in Europe and America. All governments make great play of their support for SMEs, but in most countries the reality is very different from the hype, at all levels of existence. The average Western small business would definitely regard its central government, its local government and the tax authority as being a well-armed and vindictive set of bandits determined to prevent it from succeeding in the market-place.
The panoply of difficulties confronting a would-be start-up in most countries includes at least the following:
a raft of administrative requirements (register your business, comply … Read More »