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Making taxes fair

(China Daily)
Updated: 2006-11-10 10:20

The new regulation that requires those earning more than 120,000 yuan (US$15,000) a year to directly report their income will enhance public awareness of paying tax.

Those who fail to voluntarily and honestly report their taxes may face fines of up to 50,000 yuan (US$6,250).

The Chinese have long paid taxes through their employers. In recent years, however, an increasing number of people have become self-employed or developed multiple channels of income, making it hard to track their fortunes.

Tax officers admit that today's diversified and often hidden sources of income have posed a serious challenge to their work. They must take extra pains to ferret out high-income earners who should pay more than what they have paid.

The new method will save costs and put the tax officers in an easier position. But that will heavily depend on the willingness of taxpayers to co-operate. Otherwise, nothing will change.

What makes the difference is the punishment, which may hopefully foster the public taxpaying awareness in the long run.

Punishment, however, does not always work. A policy fails not for lack of punishment, but  when it cannot engage people and make them willing to participate in and support it.

China's current taxation system, while improving, has many loopholes. High-income earners, for example, are believed not to be the major contributor to State coffers. Researchers have reached consensus that the bulk of individual income taxes comes from employees with fixed salaries.
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