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There's absolutely nothing tying this to the market, nor does the Philadelphia Phillies whose last two World Series titles in 1980 and 2008 came during terrible bear markets and recessions, as did the Philiadelphia A's title in 1929.
Let’s then imagine where the USD would sit with GDP growth of 4% and 10-year yields at 4%, for a hypothetical example (higher!); and where it would sit if the same stimulus and growth sees yields artificially capped at 1.50% (lower!). Can you see the wild ride markets could be about to set out on? It’s really quite the Show!The U.S. population is growing. China, Japan and Europe are not. Many emerging markets are also aging rapidly. Assume growth is slowing and there isn't organic growth coming except via public spending around the world. While most would say China would spend the money the best, their opportunity for infrastructure investment is limited, plus that risks stoking the housing bubble. Their domestic economy is also less dynamic than the U.S. economy. Their transition to a domestic consumer economy has been stalled for 10 years. They are doing pilot programs today in the hopes of lifting capital controls.It’s unclear how the Swedish Chefs at the ECB (“We pooot de PEPP in de poot”) would be prepared for this US recipe. They can “bork, bork, bork!” all they like, but it’s something they can’t control – just hope any US stimulus lifts their booot.
Likewise, the giant Sweetums of the PBOC, overseeing an economy where there don’t appear any post-2021 GDP growth targets, and some view the sustainable level of GDP growth being as low as 2-3%, could face a US economy outgrowing it for a decade, and potentially with higher yields too. Where would that put CNY? Today’s fixing was 6.5713, so the direction is already clear - in which case those who know think: pork, pork, pork!
The U.S. domestic economy is still more dynamic than Europe and Japan too. If (big if) the U.S. has turned a corner on glboalism and free trade, it can take GDP growth back from overseas by attaching Buy American provisions to government spending.
A dollar bull market rests on one of two scenarios and one assumption. One scenario is the pessimistic case where the world economy goes into recession/collapse. Everything collapses against the dollar before that too collapses. This is the scenario that ends the dollar as reserve currency most quickly. The optimistic scenario is the above economic scenario (or some similar form of it) accompanies rising rates. The dollar also diverges from history because demographics are everything. The assumption is that the U.S. remains "the cleanest dirty shirt." Debt levels, demogaphics, regulations are all worse in most major markets.
The biggest hole in the dollar bear argument (we're talking FX crosses, not dollar vs gold) is that it assumes the U.S. is more profligate and irresponsible than other nations. Or that the U.S. will sacrifice the dollar to remain the reserve currency. My working thesis for years has been this is a massive negative mood cycle. Increasing weaponization of the U.S. dollar by USG is destructive of the dollar in the long-term, but it also shows USG is abandoning a global coneption of the dollar. What if instead of, or along with weaponizing USD, nationoalist and populist economic policies also push Federal Reserve policy towards more domestic concerns? If you're a foreign investor in a country with worse demographics, higher debt levels, kleptocratic government or less efficient domestic economy, do you want to be outisde of a weaponized dollar system or inside of it?
The best dollar bear argument is the one I subsribe to: it's time. The dollar had a 6-year bull market. It's due for a bear market if the past ~36 years of history holds. I'm agnostic on the future and will let the chart guide me. And I will have to because both of the dollar bull market theses are still intact at this moment. Weakned for sure, but not out.
There is just one problem: none of it is true based on what China's finance minister Liu Kin wrote today in Qiushi, the Communist Party of China’s flagship magazine.Global Times: China should get ready for belt-tightening following virus outbreak
First, a quick look at what the misleadingly titled Bloomberg article, which cited Liu, says, it is far from the blanket "vow" of unconditional fiscal stimulus that one would conclude based on just reading the headline, as just two paragraphs in we read that "the nation will further perfect and implement measures this year to reduce corporate taxes and cut unnecessary government expenses."
While it is generally expected that fiscal stimulus and monetary easing will undoubtedly be the two main tools of central authorities for alleviating downward pressure on the economy and for maintaining macroeconomic stability, given the past experience and the financial risks currently facing China, a flood of spending programs seems no longer on the financial regulators' list of choices for stimulating the economy.This is an admission that China is out of "free lunch" policy space. Easing would risk inflating the housing bubble. It would risk a potentially large devaluation of the yuan.
"China will face decreased fiscal revenues and increased expenditures for some time to come, and the fiscal operation will maintain a state of 'tight balance.', Chinese Finance Minister Liu Kun wrote in an article published on Qiushi, a magazine affiliated with the Communist Party of China Central Committee. In this situation, it won't be feasible to adopt a proactive fiscal policy by expanding the fiscal expenditure scale. I, and instead, policies and capital must be used in a more effective, precise and targeted way," Liu said. Chinese Finance Minister Liu Kun wrote in an article published on Qiushi, a magazine affiliated with the Communist Party of China Central Committee.
...However, it should be noted that fiscal space constraint is not the key reason for belt-tightening. Past experience with massive stimulus already showed that a flood of investments could lead to many consequences like high levels of local government debts, and to the detriment of high-quality economic growth.
If you are a citizen of a country, should you only pay taxes on the income you earn within that country’s geographical limits, or on all the money you earn, independent of location? The United States, Mexico, India, China, and Chile tax global income. Western Europe, Japan, Canada, Peru and Colombia tax territorial income. If the world moved toward global taxation and enhanced some incipient information-sharing mechanisms, the impact on inclusive growth, especially in the developing world, would be very positive.Globalism creates a new set of problems, the solutions to which involve destroying nations, whether they care about liberty or not.
This is directly related to the implementation of the new tax law, the payment of wages and salaries from the previous monthly rate, and the change to the annual withholding method.
The so-called accumulative deduction method needs to subtract the corresponding deduction according to the monthly accumulated income, calculate the accumulated taxable amount against the withholding rate table, and then subtract the tax paid in the current year to determine the current tax payable. .
Since the accumulated income at the beginning of each year is low, the lower withholding rate is applied, and the prepaid tax is lower. However, as the accumulated income increases, the applicable withholding rate gradually increases. That is to say, within the same year, the same applicable income rate of wage income is 3%. With the gradual increase of accumulated income, the applicable tax rate is gradually increased to 10%, 20% or even higher.
...For example, Zhang's monthly salary income of 34,000 yuan, is required to pay "five insurance and one gold" 5,000 yuan, deducting 5,000 yuan exemption and 4,000 yuan of special deductions per month. Under the monthly tax rate, the monthly tax payable is a fixed amount of 2,590 yuan, but under the cumulative withholding prepayment method, the advance withholding tax in January is 600 yuan, and then gradually increase, and the prepayment in December The tax deduction amounted to 4,000 yuan.
On July 16, the Ministry of Finance announced the fiscal revenue and expenditure in the first half of 2019. The data shows that in the first half of 2019, the national general public budget revenue was 10,784.6 billion yuan, a year-on-year increase of 3.4 percent, a decrease of 7.2 percentage points over the same period last year.Notably, the 3.4 percent YTD increase is down from May: China's fiscal revenue up 3.8 pct in first five months. The economy is slowing.
At the press conference, Liu Jinyun, director of the Treasury Centralized Payment Center of the Ministry of Finance, explained to the national fiscal revenue in the first half of the year that due to the tax reduction and fee reduction policy, the growth rate of fiscal revenue in the first half of the year was reduced, especially with the implementation of the new VAT policy. The national general public budget revenue growth for the quarter was only 0.8 percent.
According to the data released by the Ministry of Finance, the national general public expenditures in January-February, January-March, January-April, January-May, and January-June increased by 14.6%, 15%, 15.2%, 12.5%, 10.7% respectively. In the same period, the national general public budget revenue was 7%, 6.2%, 5.3%, and 3.8%, respectively.VAT taxes are also falling after the initial tax cut hit.
Overall, in the first half of this year, the year-on-year growth rate of fiscal expenditure has slowed down, but it is still significantly higher than the growth rate of revenue during the same period.
Tang Jianwei believes that the current gap between revenue and expenditure growth is large, and there is definitely pressure on fiscal balance. However, in the context of this year’s central government’s proposal to achieve “six stables” through the counter-cyclical adjustment of policies, the fiscal balance should not be the focus of fiscal policy when the proactive fiscal policy is to be further “strengthened”.
Such a large-scale reform has achieved immediate results: according to the data of the State Administration of Taxation, the overall net tax reduction was 221.8 billion yuan between April and May this year alone.The U.S. under President Reagan slashed taxes and there was no dip in revenue, in part because the U.S was coming out of a recession. China is supposedly growing its economy faster than 6 percent in real terms, let alone nominal. Revenues should be slowing less than the tax cuts, not more than the tax cuts.
However, the landing of the policy has also had a significant impact on fiscal revenue: in January-February, January-March and January-April this year, domestic VAT revenue increased by 11.3%, 10.7% and 12.4% respectively. With the formal declaration of enterprise value-added tax under the preferential tax policy in May, the growth rate of domestic value-added tax revenue fell to 6.8% from January to May and further fell to 5.9% from January to June.
"The large-scale tax reduction reflects that fiscal policy is increasing its effectiveness." In an interview with Times Weekly, Yang Zhiyong said that although tax cuts and fees will affect fiscal revenue in the short term, they will play a role in broadening the tax base in the medium and long term, boosting the release of economic vitality, and in the long term they will enhance fiscal revenue and high-quality development capability.
In the first half of this year, Beijing's general public budget revenue was 317.09 billion yuan, down 2.5% year-on-year, with rare negative growth, hitting a new low in recent years.财新：社论|如何看待减税降费带来的收支缺口
The main reason for the negative growth of Beijing's fiscal revenue is the impact of large-scale tax cuts and tax reductions.
In terms of major taxes, Beijing’s first-largest tax value-added tax in the first half of the year was 98.82 billion yuan, up 6.1%, an increase of 5.2 percentage points from the same period of the previous year. This is mainly because the new VAT rate policy entered the first in May. During the tax period, the effect of tax cuts began to appear gradually.
...However, it is worth noting that the general public budget revenue in the first five months of Beijing fell by 4.4% year-on-year, while the decline in the half-year data has narrowed. According to the budget report at the beginning of the year, Beijing expects that the general public budget revenue for the whole year is expected to increase by 4%.
The annual target of tax reduction and reduction of nearly 2 trillion yuan has been completed more than half. However, the growth rate of fiscal revenue has slowed down markedly. Some provinces have even experienced negative growth in fiscal revenues. The financial impact of grassroots governments has been even greater. Some regions in the less developed regions of the central and western regions have even had large financial gaps.What must China do to generate positive growth? Only what it has failed to do for a decade: reform.
The rationale for tax reduction and fee reduction is the famous “Laffer curve”: tax cuts can stimulate corporate investment and promote economic development. After the tax base is expanded, even if the tax rate is low, government revenue can increase. However, tax cuts can reduce the burden on enterprises, but they do not necessarily activate the economy. The effect depends on a series of deep institutional factors. If structural reforms fail to keep up, tax cuts may lead to the most unsatisfactory situation: the economy continues to decline, fiscal revenues and expenditures are further unbalanced, and business operations have not improved fundamentally. In order to make the tax reduction and fee reduction measures effective, the Chinese government should spend more energy to comprehensively deepen the system reform, accelerate the pace of state-owned enterprise reform, break the administrative monopoly, expand market access, improve the business environment, and effectively strengthen the entrepreneurial and innovative activities of private enterprises. stand by. The potential growth rate of China's GDP is declining. This is not only a problem in the development stage, but also a consequence of institutional constraints. This is an insurmountable "iron gate" for tax reduction and fee reduction.财新： 减收缺口如何补
In the first half of this year, the national tax reduction and fee reduction was 1,170.9 billion yuan, making fiscal revenue only increase by 3.4% year-on-year, lower than the expected growth rate of 5%. Provinces such as Beijing, Chongqing, Guizhou, Xinjiang, Gansu, Qinghai, and Jilin even experienced negative growth.
This situation is expected. Shortly after the end of the "two sessions" in the country, the Ministry of Finance issued a document requesting all localities to do a good job in budget management of revenues and expenditures, multi-channel open source to make up for revenue reduction, and hardening budget expenditure constraints to ensure the implementation of tax reduction and fee reduction policies.
“Just like living at home, what should I do when I am in trouble? I have to sell valuable things, but I have to tighten my pockets.” A local financial department told the Caixin reporter.
For local governments, the easiest way is to make a fuss about state-owned assets, or sell state-owned assets such as factories and administrative institutions, or increase the profits taken from state-owned financial institutions and state-owned enterprises. The second is to recover the balance carryover funds and increase the coordination of various funds.
The problem is that the decline in fiscal revenue caused by tax cuts and reductions is long-term, and the measures commonly used to fill the gaps in the localities are mainly concentrated on the income side, and some of the income is one-off and not sustainable.
Government tax revenue rose 1.9% in March, down from growth of 14.3% a year ago, reflecting greater efforts to cut costs for businesses and individuals as the economy cools. Beijing promised to slash taxes and fees this year by nearly 2 trillion yuan ($297.64 billion), compared with cuts of 1.3 trillion yuan last year.
Individual tax collections recorded the biggest change after the government reformed the individual income tax regime earlier this year. Individual tax collection in March dropped 48.4% from a year ago, according to finance ministry data.
Government income from land sales also shrank further in March, dropping 9.5% from the same period last year.
Minister of Finance Liu Kun confirmed at the China Development High-Level Forum held on the 24th that the contribution rate of urban employees' basic pension insurance units will be lowered from May 1st, from 20 % dropped to 16%.China Economic Review: China cuts taxes and social security fees by RMB 2 trillion
"At the same time, we will continue to implement the policy of reducing unemployment and work injury insurance rates in stages. We will increase the stability of social security and social security subsidies for labor-intensive enterprises, and through these measures, we will effectively reduce the social security contribution burden of enterprises." Liu Kun added.
Liu Kun said that this year the central government will allocate 53.9 billion yuan in financial employment funds. By adjusting the expenditure structure, it will vigorously promote employment and entrepreneurship, focus on solving outstanding problems in education, medical care, and social insurance that the masses care about, and support development to be fairer and more quality. Education.
The rate of value-added tax (VAT) for manufacturers will be reduced from its current 16% to 13% and the VAT rate for the transportation and construction sectors from 10% to 9%.While the VAT tax is a pure cut, the social security reduction may not be. Last year, China began cracking down on very, very widespread underpayment by workers and employers. Chinese SMEs Can Only Survive Through Tax Evasion, Social Security Reform Could Be Killer covered SMEs screaming about the crackdown and the high cost of making up underpayment in prior years.
According to the report, the scale of tax reduction and reduction in the whole year of 2018 is about 1.3 trillion yuan. This year, the plan is to reduce the burden of corporate tax and social security contributions by nearly 2 trillion yuan.21st Century Herald: 2万亿减税降费超预期：制造业、小微企业受惠
The State Council, China's cabinet, announced special individual income tax deductions on Saturday, in order to lower the tax burden for those who have certain expenditures.It doesn't sound like a lot, but China has relatively high thresholds for taxation.
Those expenditures cover six areas, including children's education, continuing education, health treatment for serious diseases, housing loan interests, rent and elderly care.
...Taxpayers or their spouses who have mortgage loans for a first home can have a deduction of 1,000 yuan per month from taxable income.
Housing rent deduction of up to 18,000 yuan each year will be granted to taxpayers owning no housing in the city where they work.
An amount of up to 2,000 yuan every month will be deducted from an only-child taxpayer's taxable income for his or her parent who is over 60. Those who have siblings can share the 2,000-yuan deduction quota.An only child with a home and a child could deduct 4,000 yuan per month. A renter 5,000 yuan. The standard deduction is 5,000 yuan. In the tax brackets where this matters most, it could turn into savings of between 350 yuan per month up to 1,000 yuan. That's not a lot of money in urban China these days, but considering some families have little left over after paying the mortgage, it could represent a translate into a significant bump in disposable income.
...For children's education, an amount of 1,000 yuan (about 145 U.S. dollars) will be deducted every month from the parents' taxable income for each child's education from preschool all the way to doctoral education, including technical education.
China’s leadership signaled that further stimulus measures are being planned, as disappointing economic data showed that the current piecemeal approach isn’t working.Reuters: China to push for tax cuts, avoid competitive currency devaluation
The nation’s economic situation is changing, downward pressure is increasing, and the government needs to take timely steps to counter this, according to a statement from a Politburo meeting Wednesday chaired by President Xi Jinping.
China will push for larger tax cuts, Premier Li Keqiang said on Tuesday, adding that it would help small firms facing funding difficulties and widen access for private firms in infrastructure.To bang on the drum again, I've never argued China will devalue for competitive reasons or because of a trade war. I do think a trade war could squeeze the dollar supply and create increased pressure on the yuan, but I have and still expect currency depreciation because of past inflation. For the same reason I expect U.S. dollars will be much cheaper (eventually). Markets eventually balance. A nation that drives up asset prices with inflation reaches a fork in the road where it must choose currency destruction or crippling (in the short term) asset price deflation. I have seen no indication China will opt for a 30 percent decline in home prices nationwide.
China will not resort to competitive currency devaluation and is able to keep its yuan currency basically stable, Li added, reiterating that it would not resort to forceful stimulus to prop up the economy.
Li Keqiang pointed out that we have discussed in depth the Chinese economy and reform and opening up. China's economy and the world economy are deeply integrated. At present, we are experiencing certain downward pressures while operating smoothly. However, we have many policy tools and control measures to overcome difficulties. We have a huge market and abundant human resources, which can keep the economy long-term. We will maintain the continuity of economic policies, will not engage in "big floods", will not rely solely on investment and exports, but will continue to implement a proactive fiscal policy and a prudent monetary policy to strengthen directional regulation and camera regulation . Vigorously promote simple administration, reduce taxes, reduce fees, and take more effective measures to resolve the problem of financing difficulties and financing for private enterprises and small and micro enterprises . We will relax market access for the private economy, increase the opening up of the service industry and the financial industry, and create a fair business environment for state-owned enterprises, private enterprises, and foreign companies, and further promote the market activity and social creativity.Caixin: Why China Says It Won't Flood the Economy (Again)
Late in 2008, in the middle of the global financial crisis, China decided to unleash a 4 trillion yuan ($586 billion) wave of stimulus, mainly through infrastructure investment. After plummeting in 2008, China’s economic growth rate only slipped slightly in 2009 and accelerated in 2010 (see chart below).The conclusion:
But this rush of extra liquidity, largely provided via bank loans, left stagnant puddles in its wake as corporate debts swelled and financial risks proliferated. Ten years later, the current crackdown on excessive leverage, overcapacity and shadow banking is still in part trying to deal with its lingering after-effects.
China’s leadership, fond of agricultural metaphors, have called such massive stimulus “flood irrigation” (大水漫灌 dà shuǐ màn guàn), an ancient and inefficient method of irrigating crops by simply releasing water over the ground’s surface. Water can pool where it is not needed, and much is just lost via evaporation.
China’s latest quarterly growth figures, for July to September 2018, were the weakest since the first quarter of 2009. Although officials continue to stress that their tactics are different now, the suspicion remains that the government might just release the floodwaters again. After all, it worked last time.Let's look at the chart: it worked one time. Now they have to flood the economy to keep the growth rate from collapsing. To restart growth they need to actually deleverage. Allowing asset deflation and debt defaults is the best way, the more politically palatable way is to deleverage via inflation.
But in reality, banks’ loan eligibility requirements for small and medium-sized enterprises (SMEs) remain stringent, making it too difficult or too expensive for them to borrow, according to bankers and company executives.Prior coverage:
That has forced some small firms, including exporters, to simply give up on borrowing and put investment plans on hold.
The health of millions of small firms, most privately owned, is crucial to China’s efforts to ward off a sharp slowdown and mass job losses while fighting a bitter trade war with the United States.
...Total new loans in the first eight months jumped nearly 19 percent from a year earlier to 11.76 trillion yuan, the latest central bank data showed. That is well on track to set a new full-year record, eclipsing last year’s 13.53 trillion yuan.
But the increased lending barely compensates for shrinking “shadow” loans, one of the major targets of regulators as they seek to curb systemic financial risks.
Off-balance sheet loans used to be a major source of funding for small firms traditionally shunned by the big state banks.
After the social insurance premiums are uniformly collected by the tax authorities, will there be a substantial increase in the burden of payment? This is also a question that everyone is very concerned about.
According to the requirements of social security contributions, the salary income of the previous year is generally the base of payment. If the wages and salaries of employees are higher than 300% of the average salary employees in the previous year, 300% of the average salary of the local employees in the previous year shall be the base of payment; if the wages of employees are lower than the average salary of 60% of the employees in the previous year, the previous year 60% of the average wage of employees is the base of payment; if the wages of employees are between 300% and 60%, they shall be declared according to the actual situation.
The "Daily Economic News" reporter noted that the vast majority of people belong to the base of payment according to the wages, but the actual situation is that some enterprises have significantly reduced the base payment.
According to Hu Yijian, a professor at Shanghai University of Finance and Economics, “According to the report on social security in 2018, less than 30% of companies pay in strict accordance with the social security system.”
At present, among the 36 provinces, autonomous regions, municipalities directly under the Central Government and cities with separate plans, 22 provinces and municipalities have been charged social security fees by the tax authorities.
Generally speaking, in the areas where the tax authorities collect social insurance premiums, the fee base is being implemented year by year, the rates are stable and the income is stable, and the income is growing steadily. For example, in Jiangmen City, Guangdong Province, since the taxation department unified the collection of basic old-age insurance premiums since 2005, efforts have been made to make the actual payment base, promote the expansion of insurance coverage, and the income has grown steadily. From 2005 to 2017, the number of households paying for old-age insurance premiums in the city increased by 8.6% annually, the average annual increase of contributions was 7.2%, the average per capita contribution base increased by 14%, and the average annual growth rate of social insurance premiums was 17.8%. At the same time, the city's rate was gradually reduced from 17% before the transfer to 13%.
The aforementioned people close to the State Administration of Taxation analyzed to reporters that after the tax authorities were responsible for collecting social insurance premiums, the capacity of collection and management would indeed increase, which has already formed a consensus in society. It is necessary to levy the expenses that have not been collected before, so as to gain more space for the overall reduction of the rate. From this point of view, for enterprises that pay according to law, the tax levy will gradually and reasonably decline, creating a more fair environment for the majority of enterprises.
Li Liangda, the boss of Changzhou Yuhua Glass Co., Ltd. (hereinafter referred to as "Yuhua Glass"), did not expect that he would be famous for not paying social security.There's roughly 2 trillion in back payments across the Chinese economy.
On August 23, the People's Court of Xinbei District, Changzhou City, Jiangsu Province issued an administrative ruling showing that Changzhou Yuhua Glass Co., Ltd. owed basic pension insurance premium, basic medical insurance premium, and work injury insurance from December 2007 to November 2017. Fees, unemployment insurance premiums, and maternity insurance premiums totaled 2,011,134.15 yuan. The Fifth Taxation Bureau of the Changzhou Local Taxation Bureau of Jiangsu Province made a decision on the collection of social insurance premiums and imposed social insurance premiums on Yuhua Glass. After the levy decision takes effect, the tax authorities apply to the court for enforcement because the company has not fulfilled its payment obligations.
On July 20, 2018, the China Office and the State Council issued the “Regulations on the Reform of the Taxation and Administration System of National Taxes and Local Taxes”. The "Proposal" stipulates that from January 1, 2019, all social security payments will be levied by the tax authorities. Prior to this, the tax department levied a tax, and the human and social departments collected social insurance premiums, leaving an “operating space” for enterprises to pay less wages. According to estimates by Guotai Junan, after the social security reform is levied by the tax bureau, enterprises and individuals will pay a total of nearly 2 trillion yuan.As covered recently in Social Security Change Could Cause Layoffs and Shave 1.5pc Off GDP in 2019, and Chinese SMEs Can Only Survive Through Tax Evasion, Social Security Reform Could Be Killer and State Council Heard the Lamentations of the SMEs, Li Keqiang Call for More Cuts to Taxes, Fees, SMEs greatly fear the impact of the law. They fear they could end up like Yuhua Glass.
When the Changzhou court verdict came out, it caused a huge response. Many voices believe that the recovery of Changzhou Local Taxation Bureau has a symbolic significance, which means that local tax bureaus will recover social security from enterprises, given small and micro enterprises barely survive today, it is likely they will die.
Li Liangda did not particularly care about the impact on himself, he is more concerned about the future of his factory. Since the factory was shut down at the end of June, more than 100 workers in Yuhua Glass have left the factory to find, at present, there is almost only one person in Li Liangda, and the canteen chef is no longer coming to work. Li Liangda bought a few crates of instant noodles to allay his hunger.The article gives an in-depth history of the factory, from state-ownership to the privatization 10 years ago, to recent troubles as customers in the pharmaceutical industry switch to plastic bottles.
For Yuhua Glass, Li Liangda said that he has deep feelings and has been working in this factory since he was founded in 1975. He has been working for more than 40 years.
For the future, Li Liang said that if the government can take over Yuhua Glass, he will wash his hands and retire, but he still hopes that Yuhua Glass will be able to reopen and pay the workers' social security.
...Li Liangda said that Yuhua’s glass debt has reached 30 million, but the assets are 30-40 million yuan, and the assets can still be repaid.
For the future, Li Liangda is quite confused and looks forward to regaining production through rectification and thus getting out of trouble. If production cannot be resumed, it is hoped that the local government will take over and he can retire.
"This factory is inseparable from people. Although it is not producing, the inventory still needs to be sold, and some of the accounts need to be recovered. I can only stare at it every day." In the Yuhua Glass Factory, after Li Liangda learned this reporter also hadn't eaten, invited me to eat instant noodles together.
Taxes and social security will have big moves. The State Council executive meeting held on September 6th determined the implementation of the newly revised tax law supporting measures to reduce the burden on the masses; at the same time, it was proposed to study and reduce the social security rate appropriately to ensure that the overall burden of the enterprise is not increased.
In other words, personal burden reduction, the overall increase in business, will affect everyone's money bag.
Pay close attention to research and appropriately reduce the social security rateiFeng: 李克强：要因时而动、不失时机推出更大“减税降费”举措
From January 1st, 2019, various social insurance premiums such as basic old-age insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, and maternity insurance premiums will be collected by the tax authorities.
Since the taxation department has mastered the salary data and has a strong ability to collect and manage, many individuals and organizations that have not paid social security in accordance with the actual wages are worried that the social security burden will increase next year. Even some organizations predict that after the reform of the collection and management system, enterprises and individuals will pay a total of nearly 2 trillion yuan.
Under this circumstance, many experts and scholars have suggested further reducing the social security rate to hedge the increase in the social security contribution burden.
To this end, the meeting stressed that the current cumulative balance of pensions in the country is large, and it can be ensured to be paid in full and on time. Before the reform of social security collection agencies is in place, all localities should keep the existing collection policies unchanged, and at the same time, study and reduce the social security fees appropriately. The rate ensures that the overall burden of the business is not increased, in order to stimulate the vitality of the market and guide the society to anticipate.
This undoubtedly set companies' minds at ease.
Li Keqiang pointed out that considering the current accumulated balance of pensions in the country, it can ensure that the social security collection rate will be maintained in full and on time. Before the reform of the social security collection mechanism is in place, all localities should keep the existing collection policy unchanged, and at the same time, study and reduce the social security rate appropriately. Make sure that the overall burden is not increased.Li has been very supportive of SMEs for years, but the burden on them (financing costs in particular) only increased.
He stressed that under the conditions of a market economy, "tax" is one of the most important levers for regulating the economy. Adjusting the tax burden is closely related to the life of the enterprise and the people, and at the same time has a huge impact on the overall economic and social development.
"In the current complicated economic situation at home and abroad, we must take the time to move and take the opportunity to launch a larger 'tax reduction and fee reduction' initiative to send a positive signal to the society. This is an important measure to reduce the burden on enterprises and improve China's economic competitiveness. It is also the meaning of deepening the reform of the 'distribution suit' and transforming the government's functions." Li Keqiang said, "In the future, we can only further strictly control the government's 'three public' funds, and reduce taxes and profits for the masses and enterprises. I have said many times that the government will have to live a tight life to let the people live a good life.
Counting safety net contributions, the World Bank reckons China’s effective corporate tax burden rate was 67.3 percent last year, much higher than in the United States.
China announced in July that the powerful tax bureau will take over social security collection from the social security bureau in 2019, a move seen enforcing greater compliance by companies as the government frets over an aging population and rising pension deficit.
However, the change has sparked concerns that many companies - especially small- and medium-sized enterprises - subject to stricter tax scrutiny will struggle to stay afloat.
Only 27 percent of Chinese companies comply with the social security requirement and pay the correct amount for their employees, according to a private report published by 51shebao in August.
The Food and Agriculture Organization, the United Nations agency spearheading an international effort to control the deadly pig virus, plans to release recommendations for governments after a crisis meeting in Bangkok this week. The Philippines last week ordered a temporary prohibition on pigs and pig-related products from China, Russia and four European countries to prevent African swine fever. More nations may follow, according to the FAO.Pork is an important factor in the Chinese CPI. It's also a major source of soybean demand.
...Nine other outbreaks have been reported across northeastern and eastern China, spanning some 2,500 kilometers, since Aug. 1.
“There are serious concerns that African swine fever has been circulating in the pig population — whether backyard, commercial or wild boar — for some time,” Helen Roberts and Jonathan Smith, from the U.K.’s Animal and Plant Health Agency, wrote in an Aug. 31 report.
...Travelers from Henan province arriving in South Korea voluntarily handed over pig products that were subsequently tested and found by authorities to harbor traces of the virus, the Korea Times reported on its website last month.
But by using countermeasures such as Li’s, as well as increasing imports from other countries, encouraging domestic planting of the crop and other administrative interventions, China might help its farmers absorb the shock, analysts said.A major pig virus would also help with short-term demand, though it will send pork prices far higher than the pass-through cost of soybean tariffs.
Ma Wenfeng, an analyst from Beijing Orient Agribusiness Consultant, said China had been importing far more soybeans than it really needed and could do without US imports in the short run.
Almost all soybean farmers enrolled in the subsidised insurance policy and declined the subsidised price put. Again, the demand from China made US soybeans the perfect product. Why buy price protection when the market is too pig to fail? So soybean farmers chose subsidised protection from the elements. This year they needed subsidised protection from the market.Soybeans may have double-bottomed in July and September.
Now we know, of course, that US soybean farmers needed a China pig put. And they will get one. It's not yet clear what structure it will take, but the scale of the promised amount is... well it's significant. Compared to the US budget, $12 billion doesn't sound like that much money. But in 2016 soybean farmers got $200 million in Agriculture Risk Coverage. The total that year, for the entire country, for both programs, for all crops: $6.9 billion.
The new federal program for farmers is massive. It also seems panicked, because even if every soybean farmer in America had chosen the price protection put, the post-tariff market hasn't even hit the strike price. Right now, support kicks in when the year-long average drops below $8.40 per bushel of soybeans. The July USDA forecast, which includes effects from the tariffs, says that other importers are taking advantage of lower US prices and predicts a year-long average between $8.00 and $10.50 per bushel.
China will reimburse the buyer for the cost of the 25 percent tariff on soybean imports from the U.S. if the cargoes are for state reserves, according to people familiar with the matter.A lot of soybean imports will be going into state reserves this year, to replenish the soybeans taken out of reserves.
Why is CRS greatly concerned by the market?
The signing and implementation of CRS indicates that the personal financial asset information will be automatically exchanged between the tax authorities of participating countries (regions), and finally provide information support for countries (regions) to conduct cross-border tax source supervision.
Once wealthy people are found to have not declared a large amount of property overseas, they will not only face high personal income tax payment, but also foreign companies that may face a corporate income tax of up to 25%, and if the source of huge funds is unknown, things will be even worse...
What exactly is CRS?China is already sharing information with 58 countries as of September, 43 more are expected in the future.
In short, CRS is the global version of the Fat Cat Act.
The Fat Cat Act, the US FATCA Act that came into effect in July 2014, is the US domestic legislation to combat overseas tax avoidance and tax evasion. The bill itself does not have a taxation function, but is part of the information reporting system in the US tax law. Its specific function is actually to identify the offshore property of US taxpayers, prevent US taxpayers from disguising overseas assets, and then evading taxes.
The concept of “global taxation” was extended to the UK and later extended to the OECD (Organization for Economic Co-operation and Development, OECD).
The OECD has been entrusted by the G20 to develop the Common Reporting Standard (CRS), which is committed to nearly 100 countries or regions to implement in 2017 or 2018. China has signed an intergovernmental agreement with the United States to implement FATCA and promised to implement CRS.
Which people are affected?
So, who is the impact of CRS? How to influence? The Shanghai Securities Journal reporter gave you a complete list.
First, Chinese tax residents holding overseas financial accounts.
According to CRS regulations, the national (regional) authorities that hold deposits, escrow accounts, securities accounts, futures accounts, cash value policies, annuity contracts, financial institutions' equity/debt rights and other financial assets abroad need to deposit the above financial assets. Information about assets is disclosed to domestic regulatory authorities.
In particular, information on foreign exchange financial assets held by high net worth individuals (the balance of personal stock net worth account exceeds the equivalent of 6 million RMB), including account holder name, taxpayer, identification number, address, account number, account balance, and interest. Information on dividends, financial assets and financial assets will be in the hands of the regulatory authorities.
For high net worth individuals, these overseas assets will no longer be hidden, and their funding channels and foreign exchange compliance may also be reviewed.
Second, non-Chinese tax residents holding financial accounts in China, who have obtained the status of tax residents of other CRS countries or regions, if they hold financial assets in China, the relevant account information will also be disclosed to the corresponding country of the country.
In the identification of tax resident status, CRS is very strict in reviewing the non-resident tax status of the request, and there is a risk of being judged as a double tax resident for those who attempt to avoid taxation through overseas nationality.
Deliberate concealment and falsification of tax resident status may face civil or criminal penalties under the CRS regulations of the country where the financial institution is located, and may even violate the financial crime clauses such as money laundering in anti-money laundering laws.
The third is the Chinese tax residents who invest in the outer shell company.
It is common practice to set up a company in a country or region where overseas tax incentives are made. Individuals conduct various types of investment activities through the company's financial account. Under the CRS identification procedure, such enterprises with financial management purposes are likely to be identified as “negative”. Non-financial institutions" and directly point to the actual controller.
The capital operation information of overseas funds and stocks held through the company account will be fully reported, and the compliance problem of the account funds will be re-examined, and the investment income staying overseas will also have the risk of paying taxes.
Fourth, Chinese tax residents holding overseas insurance or annuity contracts.
The holder or beneficiary of the contract will be identified as the holder of the account, and the cash value of the contract and the distribution of income will be fully disclosed. The concealment or transfer of personal property through insurance policies and annuity plans will be monitored, and infringement of insurance information, such as the purchase of overseas foreign exchange life insurance, will also be subject to more stringent audits.
The fifth is the establishment of Chinese tax residents of offshore trusts.
The trust as a tax opaque entity is also included in the scope of CRS submission. The actual beneficiary of the trust will be penetrated and identified. The bank where the account is located needs to report the relevant information of the principal, trustee, beneficiary and protector to the tax authorities, including All information about account balances and account amount changes.
All funds under the trust will be known to the domestic tax authorities as the basis for collecting income tax. The advantages of confidentiality and non-transparency of offshore trusts will be greatly affected, and the wealth protection cover of high-net-worth individuals will gradually be unveiled.
Wang Surong, a professor at the University of International Business and Economics, told the Global Times on Monday that "domestic enterprises will pay more in social security funds for their employees under the new law."What will the change cost? Maybe layoffs and 1.5 percentage points in GDP growth.
Domestic companies were likely to pay social security funds for employees on the basis of their minimum salary before, but now they have to pay the funds based on employees' actual salaries, according to Wang.
"More social security contributions may bring a heavier burden for small and medium-sized enterprises, but they are obliged to do that," Dong told the Global Times on Monday.
Introduction: The two symposiums of the recent financial system are a bit interesting.Liu He is asking for the same thing Premier Li Keqiang (officially #2) has been demanding for the last 5 years: reducing the finance costs for SMEs. Will this time be any different?
One was on September 4th, and the People’s Bank of China held a “private business and small and micro enterprise financial service symposium” jointly sponsored by the National Federation of Industry and Commerce. The other was the financial market expectation management expert held by the Finance Committee Office on August 31. forum.
The two forums have two things in common: First, they are led/hosted by the central bank, and the chairman of the four major banks is present. Second, the theme of the meeting was to implement the relevant instructions of Vice Premier Liu He. The former is to implement Liu He’s speech on the first meeting of the State Council’s Leading Group for Promoting the Development of Small and Medium-Sized Enterprises on August 20; the latter is to implement the spirit of the three meetings of the Finance Committee and the expected management of financial markets by Liu He at the special meeting of the Finance Committee. A series of instructions.
This is precisely the two major issues of current macroeconomic regulation and control and financial policy: First, how to unblock the transmission mechanism of monetary policy and open up a virtuous circle between finance and entities? It is very important for SMEs to reduce taxes and reduce burdens and increase financial policy support. Second, how to stabilize the financial market under the impact of internal and external (internal de-leverage, external trade war)? The stable expectation is one of the stable and “stable” determined by the 730 Politburo meeting, and the expectation has largely affected the direction of the financial market.
The high specifications of the two symposiums also reflect the severity of the two major issues. Liu He once said publicly that it is necessary to treat all state-owned and private enterprises equally, and fully understand the importance of promoting the development of small and medium-sized enterprises. However, the ideal is very full, but the reality is very skinny. Under the leverage, private enterprises are difficult to issue bonds, financing difficulties, and financing financial market participants are embarrassed. Today, Wang Qiao, the chairman of the Oriental Garden, who asked questions to Yi Gang at the symposium, has just experienced a bond issue exam.
The social security collection reform that has been raging in the near future (from January 1, 2019, the social security collection will be borne by the tax bureau), which will further darken the tax burden of SMEs in the future, and the social security collection will be stricter. The increase in corporate costs is inevitable and under pressure. In 2019, it is likely to usher in a wave of layoffs. According to Guotai Junan, after the reform of the collection and management system, enterprises and individuals will pay a total of nearly 2 trillion yuan. If the company and the individual share the current rate, it will affect the total profit of the company by 13.4%, which will increase the operating pressure of the company in the short term. If it is completely borne by the individual, it will further reduce the current consumption of the residents, and the cumulative impact on GDP will be 1.5 percentage points.SMEs have financing costs (interest rates + fees) in the double digits and they may face a double-digit hit to profits for social security next year. Amid deleveraging, a possible trade war with United States and an overall slowing Chinese economy.
The threat of a pension shortfall is imminent as the population greys. In 2017, China’s pension funds collected 3.3 trillion yuan ($515 billion) and handed out 2.9 trillion yuan in payments. But the system avoided going into deficit mainly because of subsidies from the central government, official data showed.China beat the USA to permanent entitlement deficits. This is China's 1982/3, except the economy is going into a downturn instead of emerging from the worst recession since the depression and a generational high in interest rates and inflation.
The new rules may lead to a wave of small business closures because of higher costs and will put companies under closer scrutiny by tax officials, critics say. If all companies are required to fully meet their social insurance payment obligations, the average costs for businesses will increase by 30%, according to Wang Dehua, a financial analyst at the Chinese Academy of Social Sciences (CASS), a top think tank.Chinese payroll taxes are brutal:
Total social insurance payments by Chinese employers and employees amount to 39.5% of payrolls, a rate higher than in many other countries. In 2014, the average rate of OECD, a group of mostly rich countries, was 29%, according to China Social Security Journal.As is ever the case, taxpayers exhaust every avenue of legal tax avoidance. Nearly one-third of companies are finding ways to pay the minimum social security tax:
To reduce costs, it is common for employers to find ways to avoid making the full contributions, for example by dividing compensation into basic wages and bonuses, paying taxes only on basic wages, or by hiring more temporary workers to skirt social security obligations.
Some companies have struggled with the payments amid rising labor costs and slowing business. In July, China’s largest telecom equipment maker, Huawei Technologies Co. Ltd., cut its payment to the housing provident funds in several cities from over 10% of wages to 5%, the lower limit of a national standard. Analysts said Huawei made the move to cut labor costs.
The methods of tax calculation also vary across regions. Some local authorities have offered preferential policies or reduced social insurance payment requirements to attract investment, Wang said.Where tax departments are in charge of collections, payments are high. Where the local social security bureau is in charge (also ending), the payments are low:
That has left some employers leeway to minimize payments by underreporting their wage payments or workforce size, experts say.
A survey by 51Shebao this year found that only 27% of companies have made full payment of their share of social insurance contributions, while 31% paid at the bottom of the range of national standards leaving their employees with the least insurance coverage, according to a research paper published Aug. 24.
“Taxation departments have comprehensive information about companies’ business operations, and it is possible for taxation authorities to require companies to fully fulfill their social insurance obligation,” CASS’s Wang Dehua said.China's social security system (based on prior rules and enforcement) went into the red in 2014:
Official data back him up. In Guangzhou, where social insurance payments are already collected by tax departments, more than 90% of registered business taxpayers reported social insurance payments in 2015. In Beijing, where social security departments are in charge of the collection, the figure was only 42.9%.
China’s basic pension insurance fund is a crucial part of the country’s social insurance system as it accounted nearly 70% of the entire national social insurance collection in 2017, according to figures from the Ministry of Human Resources and Social Security.Not a huge burden against the entire economy's GDP, but a large burden for cash-strapped SMEs who likely make up the bulk of companies paying the minimum tax. Also, the recent business tax cuts only amount to 45 billion yuan.
While the fund had an aggregate surplus of 4.1 trillion yuan in 2017, that mainly reflected government subsidies, according to CASS professor Zheng Bingwen. Subsidies accounted for 15% of nationwide fund gains in 2016. Without them, the system would have been in the red since 2014, according to an actuarial team led by Zheng.
Without subsidies, China’s pension funds will post deficits widening from 234 billion yuan this year to 534 billion yuan by 2022, according to Zheng’s team.
At present, China's small and medium-sized enterprises have the typical characteristics of “five six seven eight nine”, contributing more than 50% of tax revenue, more than 60% of GDP, more than 70% of technological innovation, more than 80% of urban labor employment, more than 90% The number of enterprises is a new force for national economic and social development. It is an important foundation for building a modern economic system and promoting high-quality economic development. It is an important support for expanding employment and improving people's livelihood, and is an important source of entrepreneurship. Doing a good job in small and medium-sized enterprises is of great significance to stabilizing employment, stabilizing finance, stabilizing investment, stabilizing foreign investment, stabilizing foreign trade, stabilizing expectations, and enhancing long-term economic competitiveness. (Liu He August 20)Private businesses want yuan-depreciating RRR cuts. They want credit growth.
From the information disclosed so far, some private entrepreneurs participating in the symposium have publicly called on the central bank to further direct the RRR cut and maintain ample liquidity; some appeals (He Qiaonu) - "Now private enterprises are too difficult, if I can get a bank approved, I will save those companies in the pool of blood, one by one to save."They also want clear expectations and market signals:
In fact, the key to stabilizing expectations is that the government's policy logic must be consistent. It can't be shouted for leverage, and it will stimulate the release of water for a while. The chaotic policy signal will only lead to more chaotic market expectations. The expectation of stable market formation lies in the “expectation wall” between the government and the market to open up information asymmetry and trust barriers. Each policy should be fully market-guided, expected to be laid and buffered.China's private business sectors are not pleased with the government's communication:
If information asymmetry and trust barriers are not eliminated, the gradual introduction of policies will lead to greater confusion and mistrust. Recently, the fiscal and taxation system, in the hotspots such as social security collection and venture capital LP tax rate adjustment (including individual tax reform), the policy was unprepared, fully reflecting the lack of market makers in market communication.
Taking venture capital LP tax as an example, our tax laws do have imperfections, especially in terms of capital gains. (So is the social security collection reform, the burden of private enterprises is too heavy, and social security has long been missing or underpaid) . Therefore, the policy adjustment originally had certain rationality, and also broke the previous gray blank state. However, policy makers did not consider practicality. For example, many venture capital projects have been withdrawn for many years, and the collection is not very operational; and social security contributions also have such practical problems. This has led to the policy not yet officially implemented, and the market has already cried.There's love for the PBoC though:
Policy makers did not communicate with the market almost before the policy was introduced. It seems that the impacts that have been made so far have not been reasonably explained by policy makers. This is the most terrible thing to destroy/impact the market expectations.
From this perspective, the financial management department led by the central bank should be praised. This also reflects the distance between different macro management departments and the market.Ministry of Finance: not so much.
Among the four powerful domestic macroeconomic policies: the strongest is the National Development and Reform Commission and the Ministry of Finance, followed by the central bank and other central ministries, once again the major state-owned enterprises and local governments, the weakest are the various capital funds of the capital market and various Scholar experts and media. The greater the impact, the lower the frequency of speeches in the public media. Conversely, the weaker the influence, the more it needs to create momentum in the media.The words 13.4 percent of profits, "wave of layoffs" and "1.5 percent of GDP" no not often appear together in Chinese new articles. It's very possible private business is whipping up a media storm. As the article says, "Conversely, the weaker the influence, the more it needs to create momentum in the media." If not, the global growth story is about to have an very unhappy ending.
The arrogance of the fiscal and taxation system has always been the case, and it has been particularly evident recently!
Second, the impact of policy changes:
1. According to the data of the State Administration of Taxation and wages, after strict law enforcement, the state can collect more than 2 trillion social security income in one year, and the net profit of private enterprises is more than 2 trillion. After strict law enforcement, most private enterprises will not. profit, mainly affected are labor-intensive enterprises , service industries including logistics, hotels, restaurants, hotels, sea fishing while Hong Kong stocks listed on the pay of the past three years, 88 million Social Security, the manufacturing sector will also be affected, very many businesses in the past Labor costs account for 40% of revenue and may reach 60% after strict implementation . In the next step, there may be housing accumulation funds, etc., which are also strictly enforced, affecting corporate profits.
2. For the laborer, the individual needs additional expenses. In order to retain the laborer, the enterprise may also need to raise the salary budget.
"The poor cut meat and pay taxes, and the rich have tax avoidance" has long been criticized. However, from now on, the tax haven that hides the wealth of the rich may no longer exist.
Since this month, China has exchanged CRS (Overseas Financial Accounts Common Declaring Guidelines) information with other countries for the first time. The Chinese tax authorities will grasp the personal overseas income. Once they are listed as high-risk taxpayers, they face a huge review of the source of funds. It is also necessary to pay a large amount of personal income tax.
In addition, the revised personal income tax law for the first time to establish anti-tax avoidance provisions will give the Chinese tax authorities a strong legal basis. In short, China’s crackdown on the international tax haven is officially open, and the invisible rich will have nowhere to go.
A large number of Chinese accounts in Australia and New Zealand have been sealed.Referring to this news from July: Kiwi banks freeze hundreds of accounts, figure likely to stretch into thousands
As early as more than a month ago, foreign media released major news. New Zealand and Australia's major commercial banks froze thousands of accounts and asked whether the account holders belonged to foreign taxpayers, including a large number of Chinese residents.
New Zealand banks are set to freeze thousands of accounts for people who have yet to respond to requests to confirm whether they are foreign taxpayers.Back to the iFeng story:
Under new legislation, financial institutions must find out whether their customers are tax residents of other countries and report the details of those who are to the Inland Revenue by June 30 each year, starting this year.
A spokesperson for Australian state-owned Kiwibank said the bank sent letters to about 3,000 customers at the end of May and gave customers a 14-day period to supplement their overseas tax status information.
ANZ, Australia's largest bank, said it had frozen about 200 customers' accounts in a week and will continue to freeze accounts every week, as required by tax laws. Westpac and BNZ also did the same.
In fact, as early as the beginning of June, New Zealand media released news, if you do not provide foreign tax information, Bank of New Zealand will freeze your account. From July 1st, the bank has not yet completed the overseas arrears in accordance with the regulations of the bank, and all accounts are frozen. No one can be an exception. Of course, the funds in the frozen account will remain in the account, but the customer will not be able to access it.
At present, the banks of Australia and New Zealand have frozen thousands of accounts, and the scope will continue to expand.
It is worth mentioning that China, Australia and New Zealand are all on the list of information exchanged for the first time in September this year. Basic information about all non-Australian residents who open an account in Australia, such as name, ID number, address, birthday, account number, account balance, and major transactions that occur each year, as well as bank deposit accounts, escrow accounts, insurance contracts, etc. Information will be shared by the tax bureaus of China and Australia.
The threshold for collecting income taxes will rise to 5,000 yuan ($732.21) per month from 3,500 yuan, according to the amendment passed in parliament on Friday.That sounds awesome if you don't think about what that sentence says about wages. Round it to 30 percent of taxpayers, nearly one-third, will fall off the tax rolls if the threshold is 5,000 yuan in income, plus deductions for education, mortgage interest and rent. This table was posted in a recent Chinese article about high rents in first-tier cities. (See: Central Planning 101: Blood-Sucking Realtors! The Rent Is Too Damn High!) The first column is the name of top-tier Chinese universities, followed by their location. The next two columns are 985 school and 211 school. Read about Project 985 and Project 211. Basically it is a Chinese effort, begun in the 1990s, to boost the quality of their universities. The final three columns show the average salary of the 2017, 2015 and 2013 graduating classes.
Taxpayers also will be allowed to deduct expenses related to children’s education, interest on home mortgages, housing rent and treatment for serious diseases.
The income tax amendment will significantly boost consumption and cut tax revenue by about 320 billion yuan per year, vice finance minister Cheng Lihua told a news conference.
Wang Jianfan, a finance ministry official, said the number of taxpayers would decline after the tax law changes. The proportion of taxpayers in the urban workforce was expected to fall to about 15 percent from the current 44 percent, he said.
The key issue to note here is that only 15% of the URBAN work force earns as much as ¥5,000/mo. $BABA says the average consumer spends ¥9,000 on its platforms per year. Since by definition, $BABA consumers are average, they must be spending ~30% of gross annual income. https://t.co/gHz1n7mEVQ
— ASY (@doumenzi) September 2, 2018
The final bill approved by the Standing Committee of the National People’s Congress increases individual taxpayers’ annual tax-free threshold to 60,000 yuan (5,000 yuan per month) from the previous 3,500 yuan per month, expands the income range for the lower tax brackets, and adds new tax deductions, including one for parental elderly care, on top of the existing deduction for social insurance payments.The "standard deduction" and rent in a first-tier cities combines for ~10,000 yuan (1万). Elite college graduates from 2013 are making about 14,000 yuan per month.
The final bill is little changed from the first draft unveiled in June, with seven tax brackets and a top income tax rate of 45 per cent. The 5,000 yuan per month tax-free threshold was left in place from the first draft despite many demands for it to be raised further.
