China intend to cut income tax for 60 million people, and our economic analyst Arthur Kroeber finds himself – yet again – trying to explain to Western media, why this impressive looking move actually does not mean that much. In the CSM:
Raising the income tax threshold will cost the government 160 billion RMB ($25 billion) in lost revenue, according to the Finance Ministry, but this is “no big deal” for Chinese public finances, according to Arthur Kroeber, head of the Beijing-based Dragonomics economic consultancy.
“Fundamentally, China’s fiscal conditions are very strong”, Mr. Kroeber says, pointing to government estimates of a budget deficit below 2 percent this year…
Household income has been falling as a share of GDP, relative to corporate and government revenues, for several years, but the new tax breaks are unlikely to reverse that trend because income tax plays such a minor role in China’s economy.
“If the government wants to redistribute income from the corporate to the household sector, tax policy is not going to do the trick,” warns Kroeber.
- Lack of efficiency does not hurt economic growth – Arthur Kroeber (chinaspeakersbureau.info)
- Can China become a leading global innovator? – Bill Fischer (chinaherald.net)
- When East and West meet for business – Bill Dodson (chinaherald.net)
- China’s rich prefer homes over stocks – Shaun Rein (chinaspeakersbureau.info)
- Buying Prada suits, not shares – Shaun Rein (chinaherald.net)