The new regulation that requires those earning more than 120,000 yuan (US$15,000) a year to directly report their income will enhance public awareness of paying tax.

Those who fail to voluntarily and honestly report their taxes may face fines of up to 50,000 yuan (US$6,250).

The Chinese have long paid taxes through their employers. In recent years, however, an increasing number of people have become self-employed or developed multiple channels of income, making it hard to track their fortunes.

Tax officers admit that today's diversified and often hidden sources of income have posed a serious challenge to their work. They must take extra pains to ferret out high-income earners who should pay more than what they have paid.

The new method will save costs and put the tax officers in an easier position. But that will heavily depend on the willingness of taxpayers to co-operate. Otherwise, nothing will change.

What makes the difference is the punishment, which may hopefully foster the public taxpaying awareness in the long run.

Punishment, however, does not always work. A policy fails not for lack of punishment, but when it cannot engage people and make them willing to participate in and support it.

China's current taxation system, while improving, has many loopholes. High-income earners, for example, are believed not to be the major contributor to State coffers. Researchers have reached consensus that the bulk of individual income taxes comes from employees with fixed salaries.

This should not have been the case. It damages the basic principle of taxation: Fairness. If one part of the society pays taxes in full while the other at a discount, it becomes unfair to the former group.

The new initiative is aimed to fill that gap, but, paradoxically, lack of confidence in the public taxation system will hinder its smooth implementation.

From a wider perspective, tax revenue expenditure constitutes a major influence on attitudes towards taxes.

When people feel that they are provided with more and better public facilities and services, they are more willing to pay. If they are not very clear about the whereabouts of their payments, or they do not feel their payment is paying off, they get frustrated and less willing to pay.

In building a harmonious society, China is engaged in an uphill battle to solve many social problems, such as helping people gain access to affordable medical services, education and housing.

The social drive of building a harmonious society is, at first glance, not closely related to tax collection, but it is.

The government needs to make our fiscal input more transparent, placing its spending, budgetary or non-budgetary, under public surveillance.

And it must pour as much public funding as possible into improving people's well-being so that taxpayers are glad to pay taxes.

(China Daily November 10, 2006)