| The Ministry of Finance (MOF) is mulling a social security tax to replace the current social security contributions system, experts said Monday, based on recent comments by government officials. The new tax is expected to protect individual rights and save taxpayers money compared with the current dual tax collection system run by the tax and social security agencies.
Finance minister Xie Xuren said in an interview with Qiu Shi magazine published April 1 on the ministry's website that the MOF was studying the collection of the social security tax. Almost 90 percent of the 2,941 people who had responded as of Monday to an Internet survey by online business portal www.21cn.com voted against the change in the tax system, fearing a heavier tax burden.
"This doesn't mean an increase in the tax burden. It's only a name change from fees to tax rate and won't have any major impact on the public," said Yang Zhiyong, a researcher at the Institute of Finance and Economics under the Chinese Academy of Social Sciences (CASS).
The MOF has not disclosed the allocation process between the central and local tax bureaus, nor has it revealed a time frame for implementation.
Under current practice, employers are required to place deductions from an employee's monthly salary and contributions from the employers themselves based on a fixed percentage into a fund covering pension, healthcare, unemployment, work injuries and birth insurance, plus a housing fund. But many private business owners do not make the contributions in order to save themselves money.
"Once it is changed to tax status, it will enjoy a higher status and mean that the employers must pay their contributions," said Liu Huan, vice president of the Institute of Taxation with the Central University of Finance and Economics.
Other benefits are the cost savings for taxpayers and fund safety. The collection by both social security and tax bureaus is just like two "finance departments" under the same company, and the overlapping functions lead to wasted time and labor costs, Liu said. The cost will be lower for taxpayers if the tax bureau collects the tax, he said.
The new system would send tax funds directly to the central government, which would then dispense the money as needed to local governments, instead of the taxes going directly to local governments. Without clear justification, local governments won't be able to move the funds, Liu said.
A scandal involving the misuse of 3.2 billion yuan ($468.52 million) in social security funds by the Shanghai Social Security Bureau shocked the nation in 2006. Changes have not been made in the past due to conflicts of interest among different government agencies. |
