Thursday, March 10, 2011

"China's Tea Party" is a tax justice movement

Fascinating story in Hong Kong's International Business Times:

"It all started with the humble steamed bun, a white, tasteless bread roll eaten as a filler in northern China. Pan Yaomin, a representative in a municipal-level People's Political Consultative Conference, submitted to that body -- which advises parliament -- a proposal for cutting what he called the "steamed bun tax." . . . He touched a chord with his proposal, fuelling widespread discussion in Chinese media and prompting local tax authorities to defend their position and explain they did not have the power to make changes."

The newspaper then gets all, well, steamed up about this being an anti-tax movement along the lines of the Tea Party in the United States:

"A small but increasingly vocal number of Chinese are beginning to complain about taxes, placing their government in the unfamiliar position of having to defend -- and sometimes change -- its fiscal policies."

Now we have our beefs with the U.S. Tea Party, not least that many of its members seem to be mostly in favour of cutting taxes on the wealthy, and that it is substantially funded by the "Kochtopus" - a behind-the-scenes lobbying organisation set up by the secretive billionaire oil trading Koch brothers to declare war on Obama and the Democrat party. (Read the New Yorker's shocking exposé of this, if you haven't yet.)

We don't know enough about the Steamed Bun Party, as the newspaper calls it, but it's an interesting development, very different in sentiment, it seems, to what drives the Tea Party in the U.S. It looks, based on this story, to be a tax justice movement. Value Added Taxes tend to be the most regressive taxes there are. Contrary to what many of our detractors argue, we aren't generally a high-tax movement. Our core belief, by contrast, is in progressive taxation: what economists and democrats have supported since the days of Adam Smith.

As a general rule, and depending on the country and the tax system, we support lower taxes on poorer sections of society and higher taxes on wealthier sections. We support this is because the wealthier sections of society generally have the power to skew systems in their favour, and we believe that pushback is in order. And on the subject of steamed buns, look at what else Pan says:

"The steamed bun is a daily necessity for many people, and it's just not right to pay high taxes on it," he told Reuters. In truth, there is no levy targeted just at steam buns. Pan's contention was that the buns should be treated as a grain product, which is assessed a 13 percent value added tax, rather than as a processed food, charged a 17 percent VAT.

Then the article quotes Li Weiguang, a professor at the Tianjin University of Finance and Economics, one of the key advocates of reforming China's fiscal system.
"The government can do whatever it wants with its budget and taxation, without any checks. That's really terrible," he said.
And this gets to the nub of it. This is about the idea of 'no taxation without representation' - the idea that governments can't tax their people, willy-nilly, without expecting popular pushback. As a recent book on the subject of developing countries noted:
"Taxation is the new frontier for those concerned with state-building in developing countries. The political importance of taxation extends beyond the raising of revenue. We argue in this book that taxation may play the central (their emphasis) role in building and sustaining the power of states, and shaping their ties to society. The state-building role of taxation can be seen in two principal areas: the rise of a social contract based on bargaining around tax, and the institution-building stimulus provided by the revenue imperative. Progress in the first area may foster representative democracy. Progress in the second area strengthens state capacity. Both have the potential to bolster the legitimacy of the state and enhance accountability between the state and its citizens."
So this is an agenda which, on the evidence of this story, is something that we at TJN would enthusiastically support. China's "Tea Party," it seems, is a tax justice movement.

There are, admittedly, other Chinese voices in the story, which take a rather less tax justice view. Here is one:
"In the distribution of income, the state has taken too much, while companies and residents have taken too little. As such, how can we effectively boost domestic demand?" he asked. "Cutting taxes for ordinary people is the most direct and effective way," he said.
But who is this voice calling for across-the-board tax-cutting ? "Zong Qinghou, the billionaire boss of Chinese drinks company Wahaha and a parliamentary delegate." Not exactly a representative opinion (Wahahactopus anyone?)

Tax protests in favour of fairer tax systems - we're all in favour of that.


Post a Comment

<< Home