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Consumption Levy Remains a Taxing Issue
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The Ministry of Finance (MOF) and the State Administration of Taxation (SAT) announced on Tuesday consumption tax adjustments starting from April 1. The Chinese media have given much attention to this reform. Here are excerpts of comments from the press:

Oriental Morning Post: The latest consumption tax reform is expected to adjust consumption habits.

It helps regulate energy usage, protect environment by reducing the exploitation of timber resources, and narrow the gap between the poor and the rich by collecting a consumption tax on luxury items.

The taxation reform is a positive move. But some points should be highlighted for better implementation.

The major purpose of consumption tax adjustment should not be increasing fiscal incomes, as value-added tax should be the major source of fiscal incomes. To emphasize this is to prevent blind enlargement of the consumption tax regime in the future.

Consumption tax is a levy on consumption, not on production. The essence of consumption tax is redistribution of a certain part of social wealth.

Government-led social wealth redistribution should be based on fairness. The tax incomes should be used for special programmes. The aim of consumption tax imposed on disposable wooden chopsticks is to protect forest reserves. So the consumption tax incomes in this industry should go back to the protection of forest resources.

If the input into protection remains the same after the implementation of consumption tax, we can hardly call it a success to tax disposable chopsticks.

The adjustment of consumption tax has just started. It is acceptable to make future adjustments according to reality. But the correct principle and the basic aim should not be forgotten.

Beijing News: The consumption tax reform should be aimed at fairer distribution of social resources.

The main target of the latest adjustments on consumption tax is to guide consumption, adjust income distribution, and promote protection of environment and resources.

It is important to adjust income distribution. The State should build proper systems to improve the welfare of all members of society. Taxation is a major system to realize the aim. It is an economic issue as well as a political one.

There are some problems existing in the current consumption tax system, which was introduced in 1994. The regime of taxation is narrow. Some then-luxury goods are widely consumed by today's public. The tax rates of some items should be adjusted according to the changes of domestic industrial structures, consumption levels and structures. The functions of promoting resources saving and environmental protection should be enhanced.

To adjust income redistribution through taxation shows the government's orientation of values as well as the public's interests. The government's human-centred concept of administration should also be realized through the function of redistribution.

To optimize distribution of resources is a major aim of this reform too. The State's industrial policy to develop eco-friendly, resource-efficient enterprises with high added value can also be improved through taxation leverage. The adjustment of tax rates demonstrates the government's determination to solve the current socio-economic problems.

It is expected that taxation can play a vital role in the country's macro-economic management.

Yanzhao Metropolis Daily: The adjustments on consumption tax items and rates conform to the current socio-economic situation in our country. But from the legal perspective, it is still unfortunate that administrative departments like the Ministry of Finance and State Administration of Taxation decide tax adjustment policies.

Legislative power belongs to the legislature. Taxation is an issue of citizens' property rights. An adjustment on taxation is the redistribution of citizens' interests and obligations. The necessary procedures according to the modern democratic system should be: people's representatives express their ideas and suggestions to the legislature for discussion and review to reach a consensus and form a legal document. A taxation arrangement attained through such a process is democratic and lawful.

The slowness in taxation legislation is a huge regret.

Consumption tax is closely connected with public interests. But the legal basis of its collection is only a provisional regulation issued by the State Council in 1993. It is just an administrative regulation, which is below laws made by the National People's Congress (NPC) and its standing committee.

The provisional regulation has not been revised or upgraded in the past 13 years. The adjustments of consumption taxation this time were not made by the State Council, but by the MOF and SAT.

To adjust public interests without widely soliciting public opinions, no matter how fair or just it is, is regrettable.

It is essential to upgrade taxation legislation to build a democratic society ruled by law.

(China Daily March 24, 2006)

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