By Liu Shinan
The State Administration of Taxation failed to announce the
final statistics on high earners' reporting their income by
yesterday as promised. The announcement was postponed once
again.
The postponement is sure to give rise to the suspicion that
there is still a significant disparity between the numbers of those
who have reported their income and those who should have done
so.
The latest available statistics indicate that as of March 29,
some 1.38 million people had reported their personal income for
2006, while the actual number of high-earners with incomes of at
least 120,000 yuan (US$15,000) a year - the criterion for
declaration - is estimated by financial experts at more than 6
million.
The tax authorities said earlier that they had "obtained
sufficient information about most of the people" whose income has
reached the threshold for reporting. They also warned of serious
punishment for those who fail to declare their income.
Now that the April 2 deadline for reporting has passed, the
whole nation will watch whether the authorities keep their word on
punishing violators.
Any failure in keeping their word will discredit government
authority, given that this is the first time that the government
has required income declarations and the first time that punishment
was explicitly detailed.
Though the final figures of tax declaration have not yet come
out, it looks like there will be no change in the fact that the
number of non-declarers far exceeds that of those reporting their
income.
The huge gap will undoubtedly further fuel public anger over
what is believed to be the phenomenon of "milking the poor to
nourish the rich", since middle- and lower-income earners are
believed to be the main contributors to the personal income tax,
although there are no official statistics about the actual makeup
of the spectrum.
China Daily published a cartoon yesterday showing the beam of a
torch held by the tax authorities spotting only the wage earner
while failing to see the self-employed entrepreneurs, real estate
developers, business owners and celebrities crouched in darkness.
The cartoon vividly mirrors the current situation of China's
taxation of personal income.
It is understandable that it is more difficult to monitor the
income of big money makers. But this does not justify any tolerance
of the fact that four-fifths of high earners appear to be hiding
their incomes (as shown by the March 29 figures).?
In fact, due to insufficient official data, it is unknown how
many of the estimated 5 million high earners who have not declared
their personal income tax are non-wage earners. The actual number
of individuals with incomes of at least 120,000 yuan could well
surpass this figure.
What is more, cheating on personal income tax represents only a
part of tax evasion in this country. Inefficient monitoring of
corporate profits is more serious. Taxation departments throughout
the country need to improve their work in monitoring both corporate
and personal income. This involves two things: the will to monitor
and the capability to monitor.
The first concerns the quality of the tax officials; the second
concerns the means by which the officials can exercise efficient
monitoring, for instance, the establishment of a nation-wide
electronic network of information.
Calls to strengthen income monitoring have been sounding for
years but monitoring has remained weak. Substantive moves should be
taken without delay. As the first step, the authorities should
announce the final figures on personal income reporting and honor
their promise of punishment.
(China Daily April 11, 2007)