Scholars in fight to help the poor get richer
By Fu Jing (China Daily)
Updated: 2005-02-16 00:35

Tax dodgers beware the government could be on to you soon.

Chinese researchers are urging officials to crack down on those who collect the spoils of the economic boom but give nothing back to society in return.

And researchers say the wealthy should pay even more tax than they already do to help reduce the huge gap between rich and poor.

They hope such a move will continue last year's trend, when there was a slight reduction in the gap between rural and urban incomes.

Li Shi, a senior researcher with the Chinese Academy of Social Sciences, said investigating tax dodgers should be one of the government's main focuses when looking at differences in pay.

"The tax collected from the richest people is much less than what it should be," Li told China Daily.

"Measures should be strengthened to monitor the process of income tax collection, in which many problems exist."

A senior State Council official who did not want to be named said the government is stepping up efforts to fight against tax dodging.

But she ruled out the possibility of raising income tax, saying "the government is stoking up the entrepreneurial spirit and higher income tax rates will not encourage those on high incomes to invest in businesses."

"We will continue our efforts to help those on low incomes by various means," said the department director, who is in charge of the income distribution policy. Li insisted that co-ordinated efforts are needed to address the problem of the widening income gap.

"We need measures to help those on low incomes make more money and need to consider making the top earners pay more tax by improving the income tax policy and curbing tax evasion," said Li.

He said he was very concerned about the income gap, especially between urban and rural residents.

China has an official gauge indicating the degree of inequality between personal incomes.

It stood at 0.323 in 2003 but is expected to come down slightly in 2004 because farmers have seen their fastest income growth since 1997.

Because of supportive policies like tax reductions in agriculture and subsidies for grain production, the average annual income for rural residents reached 2,936 yuan (US$355) last year, up 6.8 per cent.

In previous years, the year-on-year growth rate never surpassed 5 per cent.

However, rural incomes are still far behind urban residents, whose average annual income was 9,422 yuan (US$1,139) in 2004.

"And my own research result of income inequality is more horrible than official figures," added Li.

He said China's official gauge reflecting the income gap was about 0.46 in 2002, the second highest in Asia, only following Malaysia's 0.48.

Though researchers hold different figures on the income gap, most agree the official gauge has already exceeded the alarm level of 0.40, which is internationally seen as a cause for concern.

"There is not much change in recent years and that generally reflects income inequality between urban and rural areas because of the large number of low-income farmers," said Li.

Li's study also found that the disposable incomes of the richest families, which account for 10 per cent of the population, are eight times that of the poorest in urban areas.

In the cities, some 60 per cent of disposable incomes were below average, with the rate expected to be higher in rural areas.

The income gap has also become a key concern for senior Chinese officials.

Xinhua News Agency quoted a recent survey by a research group at the Party School of the Communist Party of China Central Committee. Nearly half of 107 senior officials at or above city level across China studying at the school responded to the survey, saying the "growing income gap" is their main concern, followed by public security and corruption.

Li suggested the government set up a special office to address the problem of income inequality.

"The central government needs to co-ordinate efforts by various departments, such as finance, taxation, poverty-alleviation, education and even the police," said Li.

He said the government should consider making high-income earners pay more tax and come down hard on those who avoid paying any tax at all.

(China Daily 02/16/2005 page2)

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