People's Republic Of Taxes: China Dusts Off “Dormant” Taxes To Public’s Chagrin

In the past few years, the Chinese government has decided to dust off quite a number of “dormant” taxes, including those levied on property and personal income, as well as a local education surcharge, all signs of both the causes and effects of its high-o

A street scene in Nanjing, China (pickinjim2006)
A street scene in Nanjing, China (pickinjim2006)

Worldcrunch *NEWSBITES

BEIJING - Whether you call them Capitalists or Communists, Chinese people don't like taxes either.

In the past few years, authorities in China have decided to dust off quite a number of "dormant" taxes, including those levied on property and personal income, as well as local education surcharges.

These taxes and charges, which had been in "suspended animation" for years, have existed since China's general tax reform in 1994, or even earlier. But for a variety of administrative reasons, individuals and enterprises had been exempt from imposition until now. The levies now set to be imposed include a property tax, a sliding land-value tax, certain categories of income tax, a second house transaction tax, and a local education surcharge that had originally been applied in only a few cities.

Indeed, in China too, taxes are anything but popular. But the changing Chinese society and booming Chinese economy add other elements to the debate. For instance, when the Real Estate Tax Regulations were promulgated in 1986, most Chinese urban residents were living in public housing and did not own their houses. But now that individual home ownership is common and prices rising, the government has decided to collect property tax. Shanghai and Chongqing took the lead last year as pilot cities for imposing the tax, with it expected to soon be collected nationwide.

From the government's point of view, the property tax is aimed not only at becoming local governments' major source of fiscal revenue in the future, but also a way of inhibiting housing prices from soaring.

Gao Peiyong, the Director of the Finance and Trade Department of the Chinese Academy of Social Sciences pointed out that the debate around the 1991 tax reform foreshadowed the current push to revive the dormant taxes.

At that time, China's actual tax collection rate was only around 50% and the efficiency of collection was very low, so the government set aside a lot of space for taxes to grow. In other words, "if you want to reach a 500 billion yuan target, you have to build a 1 trillion yuan tax collection shelf," Gao explained to the Chinese financial journal Caixun.

The Chinese authority's logic for bringing back these taxes is that the laws and regulations were well established before, but the conditions were not ripe for implementation, so it's only normal to impose them now.

From the public's point of view, it looks very different.

At a time of a weakening economy and tightening of local governments' financial resources this discretionary space is now the foundation of tax abuse. Practices may be legally based, but it does not necessarily mean they are reasonable. Deeper injustice could hide underneath procedural justice.

A lot of these so-called dormant taxes are in reality newly introduced burdens which should normally be first debated at the National People's Congress, which has not happened.

From January to August 2011, China's national fiscal revenue has increased by 28.3% relative to the same period last year, up to 6.488 trillion RMB.

Today, China's state revenue has an annual growth of one trillion RMB and its total revenue will go beyond 10 trillion RMB by the end of this year. Though this is an inevitable result of its economic growth, it nonetheless is a reminder of the accelerating flow of wealth into the government's hands.

Forbes Magazine, which publishes a "Tax misery index," recently ranked China as No. 2 in world, just like the size of its economy. The People's Daily, the official Chinese mouthpiece, immediately refuted the conclusion.

Though Forbes' argument may lack a solid scientific foundation, the tax burden and the weight of resentment that the Chinese people feel are very real.

Read more from Economic Observer

Photo - pickinjim2006

*Newsbites are digest items, not direct translations

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Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.

Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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