Beijing OKs sweeping tax reforms to tackle inequality
ReutersBEIJING -- China unveiled sweeping tax reforms on Tuesday to make wealthy state-owned firms, property speculators and the rich pay more to narrow a yawning gap between an urban elite and hundreds of millions of rural poor.
February 7, 2013, 11:35 am TWN
The plans approved by the State Council — China's cabinet — also included commitments to push forward market-oriented interest rate reforms to give savers a better return and more security.
Chief among the reforms is a requirement to raise the percentage of profits contributed by state-owned firms to the government by about 5 percentage points by 2015.
Together with measures to raise wages and improve households' return on assets, the reforms signal an attempt to shift economic growth towards increased consumption and away from the current reliance on investment spending.
“The State Council is not just talking about the gap between rich and poor, they're talking about the whole economy and how income is distributed among various actors — the households, the corporations and the government,” said Andrew Batson, research director of GK Dragonomics, an economic consultancy in Beijing.
“It's about changing the entire flow of income around the national economy.”
One key change will make interest rates more flexible. Interest rates on savings deposits have lagged inflation for many years, depressing returns for households and pushing those who can afford it to more speculative investments.
“Push forward market-oriented interest rate reform, appropriately expand the floating range for interest rates on deposits and loans and protect depositors' interests,” the announcement said.
It also called for “building a long-term mechanism” to boost rural incomes, and reiterated previous pledges to raise incomes, particularly for the poor.
Citizens would see more opportunities to earn money from assets, including increasing fund products, and expanding income from rents, dividends and bonuses.
And rural migrants will get more opportunity to transfer their official residency to cities, where wages and social services are better.