(Bloomberg) — Chinese President Xi Jinping’s promise to regulate wealth has fueled speculation that Beijing may impose property and inheritance taxes on the wealthy to achieve its “shared prosperity” goal.
Several economists with ties to the government have raised the possibility of major tax reform in recent days.
Liu Yuanchun, president of the Shanghai University of Finance and Economics, advocated for a real estate tax hike this week. Su Hainan, a researcher at the China Association for Labor Studies, suggested that capital gains should be properly taxed, given that the “too rapid accumulation of wealth by a few” has sparked public debate.
Li Shi, a professor at Zhejiang University, raised the potential inheritance tax when speaking to local media about land and tax reform.
The announcement came after Xi Jinping promised to “improve the personal income tax system” on Sunday. In a speech to the 20th Party Congress, the Chinese leader called for a “well-regulated” means of wealth accumulation — all topics related to “shared prosperity” and the ongoing campaign to limit income and wealth inequality. speak.
Speculation about higher taxes has fueled market anxiety in recent days. China’s CSI 300 stock index was down about 2.2% this week as of 11:10 a.m. local time, marking its biggest loss in more than a month.
Beijing has been considering property taxes for at least a decade without imposing them nationwide. Amid the housing market crisis, plans to expand property tax testing have been delayed this year.
China has so far exempted individual investors from paying tax on profits from investments in securities other than stock dividends. There is no inheritance tax in the country.
In a report from Beijing News on Tuesday, Su said that income from capital “should not be several times higher than labor income.” A Labor researcher said the rush of people to cash out of their investments in securities such as stocks and bonds prompted the government to “fix” things by using taxes and other legal tools.
Distribution of wealth
Speaking at the Politburo, the party’s top decision-making body, in May, Liu Yuanchun highlighted taxation as one of the most important ways to improve the system of wealth distribution. In an interview with local media The Paper on Monday, he said the estate tax “must be pushed further”.
Li, a professor at Zhejiang University, said the gap in the country’s asset allocation could be resolved through policy, local media Kylian reported in a report on Monday. He said rural land reform would help farmers get more out of property income and added that inheritance and estate taxes should be introduced in time.
Liu Shanxi, head of the Chinese Academy of Fiscal Sciences, has called for reform of the hukou system for social benefits such as education and health care. Reforms to the system would put farmers on an equal footing with urban residents and help them profit from assets such as property, said Liu, a think tank affiliated with the Ministry of Finance.
“We can promote shared prosperity by narrowing the gap caused by capital gains,” Liu said, according to a separate report by Beijing News on Tuesday.
Xi is expected to secure an unprecedented third term in power at the week-long party congress held every five years.
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