With the wealth gap widening between the rich and poor following opening up of its economy, China is considering to levy social security tax in an effort to narrow the gap in income distribution.
China’s Ministry of Finance is considering levying a social security tax in an effort to narrow the wide gap in income distribution, reports an official media here quoting Finance Minister Xie Xuren.
Xie said in his article in ‘Qiu Shi’ (Seeking Truth), an official magazine of the Communist Party of China Central Committee, this year will witness personal income tax reform and taxes will be better applied as a way to adjust income distribution.
China’s social security, including pension insurance, basic medical insurance and unemployment insurance, are paid by the State, enterprises and individuals to the social security fund in the form of a “social security fee”.
Changing the form into a social security tax means the recourses for the social security fund will be broadened, a report in the official ‘China Daily’ said.
“It’s the first time China raised the issue of social security tax, targeting the existing huge gap in income distribution,” said Li Weiguang, professor of Tianjin University of Finance and Economics.
More From This Section
The current social security fund collecting system can hardly cover all citizens, he said.
At present, the social security fund is administered by provincial budgets, leading to problems due to uneven regional development and migration.
China tax system at present levies five to 45 per cent on income tax based a slab system.
Besides, it charges 25 per cent corporate tax on domestic and foreign companies and 20 per cent on small companies.
Wealth disparities were unknown to socialist China until the country opened up to private sector and economic reforms in 1980.
The booming economic growth as a result brought along with it increasing wealth gap between rich and poor and rural and urban areas, which the Chinese government plans to address and the social security tax apparently was part of it.