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Print Edition> Forum
UPDATED: October 24, 2011 NO. 43 OCTOBER 27, 2011
How Should We Look at the Tax Burden?

Wang Guoxin (www.enorth.com.cn): I think the Tax Misery Index released by Forbes magazine has some significance and we should learn from it to improve our own taxation system.

If all taxes were spent to benefit people, there wouldn't be such a big reaction to paying more taxes. For instance, in some Northern European countries, social welfare has covered every aspect of people's lives. Their citizens can live an unworried life even without being employed. The problem in China is people don't know where their money goes.

Statistics from the Chinese Ministry of Finance show national fiscal revenue in the first eight months in 2011 has reached 7.43 trillion yuan ($1.16 trillion), a 30.9 percent increase year on year. Since tax reforms in the 1970s, taxation in China has been increasing rapidly.

So, the government hasn't done well enough either in reducing taxes or making efforts to improve the fairness in levying taxes. Besides, supervision of the use of tax revenue is inefficient. It's an astonishing fact that much tax revenue is inappropriately used or even wasted. Administrative expenditures account for the biggest part of fiscal expenditure, while the proportion of money spent on improving people's livelihoods has been reduced.

We should treat the result of Forbes magazine's Tax Misery Index as a good reference for thinking about and improving China's taxation system rather than simply rebutting and questioning the result.

Wu Muluan (Beijing News): The nature of the Tax Misery Index is the price-to-performance ratio of public services offered by the government. As Forbes magazine chose constant and similar standards for all countries, there are reasons for China's No. 2 place on the list. Government officials should ask themselves whether domestic citizens agree with the list and how the government should adjust the country's taxation system.

The nature of taxes is the price of public services and the tax misery index reflects its price-to-performance ratio. Many Chinese believe in the list because they feel public services are inadequate and don't merit the taxes they have paid for them.

In 2009, tax revenue accounted for 17.46 percent of China's GDP, very close to the amount in developed countries. But the level of China's public medical care, education and social security still lags behind the developed countries.

At the same time, administrative costs account for a high proportion of China's fiscal expenditure. Statistics of the International Monetary Fund show administrative costs in China are 18 percent of all expenditure, while those for the United States, Japan and Poland are 13 percent, and Ukraine's is only 8 percent during the same period.

The costs for levying taxes in China are too high. A report of the National Audit Office says the average cost of each civil servant in taxation departments of 18 provinces reached 58,300 yuan ($9,118) in 2006, more than twice the average level of all civil servants in China that year.

The reasons for some people's agreement with the Tax Misery Index are their perceptions in daily life. First, people feel the government has imposed more new taxes than it has reduced. Second, the public services the government offers are far from adequate to meet people's demands, with aspects lagging behind countries with similar development levels. For instance, a law in 1993 stated by the end of the 20th century, expenditure on education should be more than 4 percent of total expenditure. But this goal still hasn't been realized today, even with soaring national fiscal revenue.

There are some flaws in Forbes magazine's Tax Misery Index, but it's useless to blame it. We should learn from this list that the current administrative costs are too high and public services too little. So although people pay a great deal of tax, they don't get corresponding public services. This is the reason why they feel miserable about paying taxes.

Ma Guangyuan (http://epaper.wzrb.com.cn): The overall tax burden in China is too high. The fiscal revenue has been increasing at a much higher rate than that of the GDP and people's incomes. China has not yet become a high-income country, but its tax burden has reached the level of high-income countries.

If the tax burden in a country is too heavy, it's absolutely not right. It's not fair for the government to get excessive amounts in the primary distribution of national income.

Xu Xiaonian (http://money.sohu.com): In some developed countries, levying a tax needs to be approved by parliament. But in China how the government collects money and how it spends it are not under effective supervision of the National People's Congress. There are two solutions to lessen people's miserable feelings about taxes. First, it is the people who have the right to decide how much tax they should pay and how the money should be spent, with the government under strict supervision. Second, in a general sense, if there is not an efficient supervision system, the government should levy fewer taxes.

Zhang Bin (www.xinhuanet.com): Compared with many other countries, the actual tax burden in China is not so high. But why do many people place credence in the list? There are two main reasons.

First, the taxation structure in China has many flaws. Indirect taxes, such as taxes paid in the consumption process, are too high, and direct taxes, such as individual income taxes and property taxes, are too low. This taxation structure has imposed on China's low- and middle-income classes a heavier tax burden and does not help regulate income distribution.

Second, the budget for fiscal expenditure is not transparent and its structure should be adjusted. The tax burden is eventually measured by the quality and quantity of public services people get from the government. Although the government has spent more on improving people's livelihoods, the budget for fiscal expenditure is not transparent and lacks public supervision.

The solution to alleviate people's feelings about their tax burden is not to reduce taxes but to improve the taxation structure and system. First, the government revenue must be strictly regulated by law. Second, the taxes for high-income people should be increased by raising direct taxes, such as individual income and property taxes, to realize greater equality in society. Finally, the fiscal expenditure should be adjusted with more money spent on improving people's livelihoods and less on government administration. Also, the budget should be fully discussed by all citizens and come under the people's strict supervision.

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