Reform can help ease tax burden of firms

Cao Dewang, chairman and founder of Fuyao Glass Industry Group in Southeast China's Fujian province, recently complained that the tax rates in China are higher than in the United States. The difference in corporate taxes in China and the US is owing to their different taxation structures. China's taxation mainly consists of indirect taxes on enterprises, while the US gets its tax revenues mainly from direct taxes imposed on individuals. That's why enterprises feel the tax burden in China is heavier.

Many have accused Cao of "running away" from the country. But since many Chinese enterprises have invested in foreign countries (or are preparing to do so), it is unfair to describe Cao's foreign investment abroad as an act of "running away" from the country, especially 65 percent of his company's market is in China.

Cao has mentioned the comparatively low taxation in the US, but he has also said the cost of human resources is higher in the US. The labor cost in China may still be relatively low but it is increasing, and the country faces the challenge of an aging population, which is expected to intensify in the future. This means China's demographic dividends are diminishing. Cao's complaint should therefore prompt the authorities to deepen the taxation structure reform.