Paul L. Caron

Monday, July 18, 2011

Progressive Income Taxation in China

Richard Krever (Monash University, Australia) & Hui Zhang (State Administration of Taxation, China) have published Progressive Income Taxation and Urban Individual Income Inequality, 17 Asia-Pacific Tax Bull. 192 (2011). Here is the abstract:

The market economy has brought tremendous wealth and equally significant income inequality to China. This article attempts to analyse the role that different types of income play in fostering inequality or the extent to which the tax system, with a notionally progressive personal income tax, may mitigate that inequality.

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This is really puzzling...proposing to use the tax system to "spread the wealth," a socialist notion, and then saying that the best way to do that is with a "flat tax," pushed in the U.S. by conservatives. But, the purpose of taxes is to raise revenue rather than making income distribution "fair," and a flat tax will never be passed by politicians who will not cede control over businesses and people's lives.

As a side note, here's part of the Chinese tax system not in the article:

[Chinese Gov't Hits Dissident with Huge Tax] - July 14, 2011

Chinese authorities told representatives of outspoken artist Ai Weiwei's design firm Thursday that the company had not paid corporate taxes for a decade, but did not allow them to keep documents showing the alleged offense.

The representatives, including Ai's wife, were shown the documents at a hearing they had been granted to challenge a $1.85 million tax bill delivered by authorities after the dissident was released from nearly three months' detention. ....

Posted by: Woody | Jul 18, 2011 8:10:16 AM