China Considering Revising Social Benefits, Introducing Social Security Tax

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Apr. 5 – China’s Ministry of Finance is considering levying a social security tax in an effort to narrow the wide gap in income distribution, Chinese media reported on Friday, citing Finance Minister Xie Xuren.

Xie said that the government would reform personal income taxes in 2010, and funds collected from taxes would be better distributed to help fight the growing income gap between rich and poor.

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 social security into a tax would help broaden the amount of money that the fund is able to collect and distribute.

At present, the social security fund is administered by provincial budgets, which can be problematic due to uneven regional development and migration.

1 thought on “China Considering Revising Social Benefits, Introducing Social Security Tax

    Chris Devonshire-Ellis says:

    It’ll be interesting to see how this pans out, and whether it’ll be just a shifting of the tax / welfare base or an out and out increase. China has to be a bit careful not to out-compete itself. To compare for example with India, China’s mandatory welfare to employees is about 50-60% of salary against 10% for India, and Chinese Income Tax is also soon to be considerably higher than in India. See: http://www.2point6billion.com/news/2010/03/23/indian-iit-to-be-significantly-lower-than-china-4673.html
    They’ll need to be careful not to suffer a hemorrhaging of part of their manufacturing base. – Chris

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