Pan Yaomin, a member of the Chinese People's Political Consultative Conference (CPPCC) of Jinan City in north China's Shandong Province, recently suggested the government drop a tax related to steamed buns. He claimed that 17 percent of the price of a steamed bun goes to the tax collector.

Pan's sudden taxation advice surprised the public, who seemed to have never heard about a "steamed bun tax." Yet not everyone fully comprehended how the tax works. Pan was referring to the value-added tax that is levied on steamed bun makers. It's a normal practice. When purchasing steamed buns from a retailer, there are a host of taxes: business tax; urban maintenance and construction tax; an education tax; and some additional taxes and fees.

The misunderstood "steamed bun tax" was overplayed in the media, but it reminded consumers of the high tax rates of steamed buns and rising prices in general—prices that seem to be perpetually climbing, and there's a growing wave of sentiment that it's high time to relieve the burden on ordinary people.

Pan is a local wheat mill manager, and his suggestion was mainly for the good of his own company. Nonetheless, he pinpointed an effective way to help the country ease inflation. As the consumer price index continues its upward swing, the government can no longer ignore the problem of inflation. If it is not properly addressed, the national economy and people's livelihoods will be adversely affected.

There are a variety of methods to curb inflation. Generally, they can be divided into two groups: expansion and contraction. Currently in China, as the economic system is not fully established and the laws need further improvement, boosting investment and increasing taxation seem easier than stimulating demand and reducing taxes. As a result, when inflation pressure mounts, the government tends to choose the former of the two methods. In the short term, it will relieve the tension, but in long term, it may worsen the situation and prolong the crisis.

Under mounting inflation, to prevent Chinese economy from slumping, the government should reduce taxes levied on industries concerning people's livelihood, lighten citizens' tax burden, curb government's administration costs, and keep expenditures within the limit of revenues.

(This post was originally written in Chinese and translated by Chen Xia.)

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