2011-03-25

Chinese tea party

Missed this from a couple weeks ago.

Analysis: China's "Tea Party" starts call for lower taxes
While the economy has grown by an annual average of 10.5 percent over the past decade, government revenues have increased by an average 20.1 percent a year during that time.

That has directly contributed to imbalances in the Chinese economy. Mirroring a fall in the share of national income going to workers, consumption has gone from 46.4 percent of GDP in 2000 to 35.6 percent in 2009, abnormally low for a peacetime economy. Investment -- a reflection of the government's spending power -- rose to 47.7 percent of GDP from 35.3 percent in the same period.

"The system has to be reformed, otherwise China's economic transformation won't be realized," said Zhang Xiaojing, a researcher with the Chinese Academy of Social Sciences.

Beijing will soon move in that direction by raising the minimum threshold for income taxes from the current level of 2,000 yuan ($305) a month. Local media reports say it may be lifted to 3,000 yuan, but critics call for more aggressive change. Zong of Wahaha has called for the floor to be set at 5,000 yuan.

There is no talk of lowering existing income tax rates. In China's graduated system of personal tax, the rate for the lowest bracket is 5 percent.

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