Three news items that are interesting vis-a-vis the rise of the Chinese economy:
China is changing its value-added tax system to focus on collecting revenues for consumption rather than production. The Financial Times reports (sorry, it's a subscription-only page) that:
While details remain scarce, the change of VAT to a "consumption-oriented" system could prove a boon for capital- and technology-intensive industries. Currently, they pay up to 17 per cent on fixed assets such as production equipment, but the new system should clear the way for exemptions and reductions.The policy blueprint also called for general simplification of the tax code, a harmonisation of rural and income taxes, unification of enterprise tax and greater transparency on government budgets a measure that could help rein in rampant corruption and waste. It amplified earlier support for private involvement in the economy, but also stressed the leading role of state ownership.
A shift away from taxes on production is a radical change from the communist policy of extracting revenue from companies doing business in the country. It will ease concerns about direct investment and, concurrently, will increase the tax burdens on expats who expect to live high on the hog in China.
One of the outcomes of the Asia Pacific Economic Partnership meeting this week is that the 21 countries attending agreed to increase regulatory efforts to ensure transparency in government and business activity. A coordinated effort to fight corruption is much needed, as it is virtually impossible to establish meaningful country-to-country benchmarks when assessing business opportunities because so many costs are hidden in the top drawers of corrupt officials and businesspeople.
Finally, China's minister of land and natural resources was tossed out of office for participating in real estate scandals. According to Agence France Presse: "'Tian Fengshan is no longer the minister, we don't no why he was removed,' the ministry official told AFP. 'It is not convenient to talk about this issue at the moment.'"
I would not want to be Tian Fengshan.
Posted by Mitch Ratcliffe at October 22, 2003 12:42 PM | TrackBack