China’s ’35 Point Plan’ Seeks to Reduce the Wealth Gap
Feb. 8 – Beijing has signaled it will be pushing forward with proposals to implement a “35 Point Plan” that will be under discussion at the CCP annual meetings next month. The meetings, which will see the new leadership under President Xi Jinping and Premier Li Keqiang formally unveiled, are expected to usher in a variety of changes to the state taxation system. Concerned about the growing income inequality gap, the 35 Point Plan (introduced on the Central Government’s website under the rather misleading title “Income Distribution Plan”) includes a number of discussion topics that could alter China’s tax and social contribution structures, such as:
- The revisal and/or removal of exemptions for foreign individuals on dividend and bonus incomes received from foreign-invested enterprises
- A ceiling to be imposed on salary levels for executives of China’s SOEs
- Improved tax collection among China’s SOEs
- The imposition of a nation-wide property tax
Of note here is the government’s aim to improve its fiscal tax collection from SOEs. In 2011, Chinese SOEs contributed about 8 percent of their combined RMB1 trillion in declared profits to the Chinese treasury, way below the official CIT rate of 25 percent. The proposed plan calls for them to effectively double that by 2015.
While the 35 Point Plan has yet to be fully debated, getting some of these measures through and passed onto the statute will surely be tough for the new Chinese leadership. However, calls to do away with some of the preferential tax policies afforded foreign individuals under Caishuizi  No. 020 won’t likely be a political hot potato, and the removal of some tax exemptions for foreigners are likely to pass through the CCP without many objections.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia.
You can stay up to date with the latest business and investment trends across China by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
An Introduction to Doing Business in China
Asia Briefing, in cooperation with its parent firm Dezan Shira & Associates, has just released this 40-page report introducing everything that a foreign investor should be familiar with when establishing and operating a business in China.
Human Resources and Payroll in China (Third Edition)
A firm understanding of China’s laws and regulations related to human resources and payroll management is essential for foreign investors who want to establish or are already running foreign-invested entities in China. This guide aims to satisfy that information demand, while also serving as a valuable tool for local managers and HR professionals who may need to explain complex points of China’s labor policies in English.
Social Insurance and Payroll
In this issue, we take a “back to basics” approach to China’s mandatory benefits. Where, exactly, is that extra 35-40 percent on top of an employee’s salary going? What are social insurance contribution rates, base amounts, and tax exemptions? How does all of this figure into the payroll process? We next look at mandatory benefits as a piece of the larger payroll puzzle, with highlights on two very China-specific pieces: FESCOs and hukou, China’s “domestic passport.”
- Previous Article China’s VAT Reform Saves Taxpayers RMB40 Billion
- Next Article Happy Chinese New Year from Asia Briefing