China unveils sweeping tax policy changes to narrow rich-poor divide
Beijing, Feb. 7 : China has unveiled sweeping policy guidelines to narrow the growing gap between rich and poor.
The country has vowed to turn over more of the profits of state-owned companies to pay for ambitious welfare programs and to take other steps to root out corruption and provide for the needy.
According to the Wall Street Journal, in a policy statement filled with populist rhetoric about the need for greater equality, China's State Council, or cabinet, pledged to boost the social safety.
The cabinet then took aim at the nation's powerful state corporations, effectively warning them they would have to shoulder some of that extra cost, the report said.
It said that the 'narrowing the income gap is essential for ensuring social justice and social harmony. the State Council said in a statement posted on the central government website on Tuesday.
According to the report, in its most specific step, the State Council's new guidelines call for state companies to hand over an additional five percent or so of their profits to the government by 2015.
According to the Peterson Institute for International Economics, Chinese central state-owned enterprises earned more than one trillion yuan, or 160 billion dollars, in net profits in 2011, but only 82.3 billion yuan was paid out in dividends,
Economists have long been urging Beijing to compel state companies to hand over more of their profits to the central government as a way to help pay for increased spending on pensions, health care, low-income housing and education, the report said.
A stronger social safety net is seen as crucial to China's economic rebalancing, freeing up household income for consumption.
While no new tax rates were announced, the guidelines pointed to the need to bring 'all sources of income' under the tax system.
The State Council also suggested it might take aim at some of the most sensitive areas of wealth accumulation by taxing inheritance and real estate.
Authorities will also step up efforts to track and control illegal income, including from government officials, the report added.
It vowed tough action in cases of false reporting of assets, noting a rising problem with hidden wealth.
The State Council said the government also plans more active policies to boost employment and it will press for a 'reasonable' rise in wages for low-income workers.
According to the report, it also said it would strictly regulate bank fees. Banks have been widely criticized for charging too much for some of their services.
The State Council also pointed to a big wealth gap between the urban and rural regions and vowed to provide more fiscal support for the less developed central and western regions of the country, it added.