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Dying rich need not mean dying disgraced
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By Xu Bin

A rich man's legitimate wealth could be distributed for charity or used for other worthwhile purposes. It is not so easy to determine which way is more beneficial to the society, if moral sensitivities are set aside. Although the distribution of wealth tends to be received with public acclaim, this is not the same thing as generating social benefits.

Personal wealth can be used to increase the production of material goods, some of which will then pass on to other members of society and hence provide employment opportunities. Alternatively, it could be invested directly or through financial institutions to promote economic prosperity enjoyed by all. Even if one only hides one's wealth at home – as was formerly the case with rich merchants from Shanxi – by such means excess liquidity is eliminated from the system, and the value of other people's money thereby appreciates.

"The man who dies rich dies disgraced," is a famous saying from Andrew Carnegie, who donated all his wealth to charity. He was noble-minded, but his charitable actions did not necessarily result in greater social benefit than if he had spent his money in other ways.

Such dignified deeds will always win admiration throughout the world, as they respond to humanity's spiritual needs. However, they ought to be the result of one's own free will, and not imposed by decree. Alternatively, an inheritance tax could be imposed on the rich at the rate of 60 percent, as proposed by Chen Guangbiao, a noted Philanthropist who won nationwide fame for his great contribution to rescue and relief endeavor following last year's Sichuan earthquake.

In fact, the case is not so straightforward. Even if an inheritance tax were imposed, only those who were willing would pay it. Others could avoid the tax by various legal means if they wanted to. For example they could change their nationality, or make offshore deposits, or use other means. Such tax avoidance results in flight of capital and human resources, which does great harm to the economy as well as wider society. In this case, is there a benefit in imposing inheritance tax?

Even in America, heated debates continue on the question whether an inheritance tax should be imposed. The two sides are well-matched: some rich people spend money on advertisements against the abolition of inheritance tax; others avoid the taxes by changing their nationality or by other means – measures which do no good to the American economy and society. Mainstream media prefer to report the former, and in the public arena the debate tends to focus on the morality of this case.

But rich individuals' urge to distribute their wealth and promote the development of public charity is motivated by a sense of social fairness and justice, not the imposition of inheritance tax. Only when people love their society, feel satisfied with its operating rules, and hold a firm belief in its future, will it meet their inner needs and hence inspire them to distribute their wealth to society. Subjectively speaking, the more that fairness and justice are recognized, the more people will feel willing to distribute and donate their wealth.

There appears to be a global trend towards the abolition of inheritance tax, although it still exists or did exist in most nations. Hong Kong has abolished it, as has Singapore. Heated debates in Britain and the United States are evidence of public dissatisfaction.

Since the tax system is closely connected with morality, I would like to make the following three points:

Firstly, the logic of the tax system must be independent of perceptions of public morality.

Secondly, it is not the case that one's wealth will be of benefit only if it is directly distributed to society. Benefitting society means far more than simply charity. Even if giving to society is an important element of a moral life, dying rich need not mean dying in disgrace, on condition that the sources of the wealth are legal and justified.

Thirdly, inheritance tax is just one part of a comprehensive tax system. Although China does not impose an inheritance tax, it is indeed one of the countries with the highest composite tax rate, and its personal tax misery index is the highest in the world. Hence, adjustments have to be made to the present tax system, whether or not new taxes are to be imposed. Whatever the case, and whatever changes might be made to individual taxes, the total tax burden must be reduced.

(China.org.cn translated by Wang Wei, March 6, 2009)

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