From Dr Kerry Brown.
Sir, John Plender’s statement (“Underestimate the revolting rich at your peril”, FT, September 10) about the Tea Party group in the US opposing taxation at a time when higher taxes might put the country in a better position to engage with rising competition from China raises an unintentional but interesting parallel.
Of Chinese government fiscal revenue, about 75 per cent is raised by the central government and the rest by provincial governments – but they constitute the vast bulk of the expenditure (90 per cent on some estimates). Provincial governments in China are frequently cost centres, but at least it means the central government has a major point of control over them. Of this centrally raised revenue, over 50 per cent comes from state-owned corporations, 25 per cent from non-state and foreign enterprises, 5 per cent from taxation on goods and services, and a mere 20 per cent from personal taxation. One of the remarkable things about China now is that, whatever else it might be, it is not yet a country of taxpaying stakeholders, but rather of hundreds of millions who, through a cash economy and other strategies, have worked out ways of avoiding paying tax.
It is an interesting political question, therefore, of what will happen when the central Chinese government, as it must do one day, starts asking its citizens to pay more taxes, and puts in place meaningful ways of gathering these. Chinese citizens are probably not clamouring for too much democratic accountability from the Communist party at the moment, largely because so many of them are not directly taxed by it. That social contract will almost certainly change when the government starts taking their hard earned cash direct.
Kerry Brown, Head of Asia Programme, Chatham House, London SW1, UK
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