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News, Page 4, Issue 446, November 30, 2009 Translated by Liu Peng Original article: [ Chinese ] China's Ministry of Finance (MOF) issued a notice on November 25 which redefined additional bonuses liketransportation payments, communication subsidies and other benefitsas part of an employee's monthly salary. These extra payments,which were previously classed as "welfare" and therefore notsubject to tax, will soon be taken into account when determining anindividual's taxable income. On November 26, an official from the MOF revealed to the Economic Observer that the ministry's purpose in introducing these new rules, was tostrengthen the management of the high amount of welfare paymentsthat are currently being awarded at the country's monopolyenterprises, and by doing so, make the payment system at theseenterprises more transparent. Despite the intentions of the ministry, the notice caused quite astir amid the public with many people weighing in on the topic. Alarge number of regular wage-earners were worried that theimplementation of the policy would result in a reduction of theirtake home pay. In addition, others questioned why the newregulations were only being applied to employees working incompanies and were not being extended to include China's publicservants. Regulating "Welfare" Income Payments at China's Large Enterprises "The MOF's move is connected with an earlier nation-wide inspection campaign launched by the State Administration of Taxation against largeenterprises in early September this year," a financial manager toldthe EO. A taxation official who took part in the inspection campaignrevealed that large state-owned enterprises (SOE), especially thoselarge monopoly enterprises, were found to have been awarding theiremployees generous welfare payments that exceeded those of othercompanies, which aroused suspicions among tax collectors that theseenterprises were helping their employees to evade their personalincome tax obligations. The problem was most evident in the awarding of transportationsubsidies. Some senior managers at certain SOE could apply fortransportation subsidies worth several thousand yuan and sometimeseven in excess of ten thousand yuan a month, amounts that wereoften close to, or even above, their base salary. An official from the MOF explained the new regulations would makethe system by which such enterprises paid their staff moretransparent. "The regulation will allow us to better regulate the pay ofhigh-income senior managers at SOE and also the relatively highincome of employees in other large and medium-sized enterprises,"the official added. Su Nanhai, director of the Commission of Salary Studies at theChina Association for Labor Studies, believes that allowing housingand transportation subsidies to be taken into account whencalculating the amount of income tax owed by an individual is amove in the right direction. While discussing the new MOF announcement, a pay officer at anunnamed business said that "their personal income burden of thosewho work at companies that don't offer this kind of 'socialwelfare' will not be effected. But those who receive substantialtransportation, communication and housing subsidies, can expectthat their tax payments to increase by a large margin." Calls to Clarify Scope of New Policy Although broadly supporting the new regulations, Su Nanhai alsoshared his concerns about the timing and scope of the newregulations with EO. He noted that as the global financial crisis has not yet completelypassed and many people are still not willing to spend, theintroduction of these changes to tax policy could well have anegative impact on the much-touted goal of "expanding domesticdemand". In addition, at a time when many people were actually hoping thatthe government would raise the minimum threshold at whichindividual income is taxed, the appropriateness of introducingthese new rules at this juncture probably needs furtherconsideration. He suggested that the MOF should make it clear that the regulationsare targeted at the problem of high "welfare payments" at monopolyenterprises in order to avoid social misgivings. The financial manager quoted above revealed that although ordinaryenterprises wouldn't be targeted by the tax bureau for now, as timewent on, all enterprises would eventually be required to obey thenew rules. Su said "If all enterprises are to be required to implement the newregulations, employees with relatively low income will obviouslyalso be affected." In addition, Su pointed out that the regulations would likely leadto a large rise in the official measure of the average wage ofemployees in China's cities and towns. That said, this shift would require the National Bureau ofStatistics (NBS) to alter the way in which it collects and collatesdata in cooperation with the Ministry of Finance. As for why the new rules don't apply to public servants, our sourceat the MOF didn't offer a direct response. He simply emphasizedonce more that the regulation only applies to workers employed bybusinesses and no rules had been issued in relation to any relatedproblems that might exist in the public service. Links and Sources Ministry of Finance: Announcement (Chinese) Economic Observer: A Tax on Mooncakes Xinhua: image (Chinese). I am an expert from neoprenesurfingsuit.com, while we provides the quality product, such as Rash Guard Shirts Manufacturer , China Camo Hunting Clothes, Neoprene Waterproof Gloves,and more.
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