Are Chinese Enterprises Being Taxed to Death?

Chinese firms establish overseas branches to flee high taxes. One company spokesperson suggested that China’s taxes are 35 percent higher for manufacturers in China than the United States, and Zhang Jun, a professor of economics at Fudan University, analyzes the complaint for Project Syndicate. A strict interpretation suggests that China’s tax burden is 29 percent and 10 percent less than global average. Other calculations suggest that China’s tax revenues are not exorbitant. Many firms receive tax incentives, and taxes vary across the country. Zhang offers a reason for the perception of high taxes: “China collects more taxes from producers, and less from consumers, than most developed economies,” Zhang notes, and “more than 90% of all taxes and fees are paid by Chinese enterprises, while less than 10% are paid by individuals.” Tax evasion, government surcharges and fees, and rising land and labor costs are other challenges that squeeze company profits. Zhang urges a more transparent, straightforward tax system for China and cost containment to keep Chinese firms competitive. – YaleGlobal