(Deutsche Welle Chinese website) "Neue Züricher Zeitung" reported from Beijing that due to the emptiness of public finances, the salaries of many urban public officials in China cannot be paid on time. Forced by financial difficulties, “making money” has become a top priority for local governments. The report titled "Rich Rich People Become Prey for Government Seizure" reads:
“The current large-scale actions are targeting wealthy Chinese people with overseas investments. Relevant authorities require them to pay back property tax arrears.
According to relevant legal provisions, Chinese citizens have always had the obligation to pay so-called global income tax, that is, income earned from investing in stocks, bonds, real estate or deposits overseas. Until recently, however, investors could easily avoid paying taxes because Chinese authorities were unaware of their citizens' overseas earnings.
China joined the so-called Common Reporting System as early as 2018. Under this system, banks and asset management institutions in participating countries will exchange information with each other, including foreigners’ accounts and income status, etc. However, it was only recently that China's financial authorities evaluated the relevant data and gained an initial grasp of the approximate scale of tax arrears by its citizens. Jennifer Lu of Hong Kong consulting firm Dezan Shira & Associates wrote: 'China has moved from the preparation stage to the execution stage. ’
Over the past 25 years, hundreds of thousands of Chinese have entered the wealthy class. In 2001, the average income in China was only US$1,000, but now it has soared to US$14,000. Currently, China already has 500 wealthy people with assets exceeding one billion US dollars. Some of their assets are invested in London real estate, the US stock market or Western art collections. In Hong Kong banks alone, the amount of Chinese deposits has exceeded US$1.7 trillion.
Under pressure from the government, tax authorities in numerous provinces have been sending letters, phone calls and text messages to those who owe taxes over the past few months. According to media reports, some tax departments have also set up special operations teams specifically responsible for searching for the whereabouts of billionaires. "
Neue Zürcher Zeitung reported that as the authorities are required to make up for the past three to five years of tax arrears on overseas assets before the end of October, uneasiness is spreading rapidly among the wealthy, and some people are even trying to escape their tax obligations by changing their nationality:
"The biggest problem is how to determine the amount of tax. Some people receive tax payment notices that list specific amounts, while others only receive a general estimate. Relevant departments claim that the estimated tax amount can be used as the basis for negotiations between the two parties. The operation methods of the Chinese tax authorities do not seem to have formed a fixed pattern, but their determination to collect the tax arrears is clearly unquestionable.
Many overseas investors are trying to make up for their taxes, some are borrowing money, and some are trying to transfer some of their overseas assets back home. But moving money isn't easy. According to China's strict capital flow controls, each Chinese person can only send out US$50,000 overseas each year, and the amount of overseas remittances received is also limited to US$50,000. However, some provinces have already signaled that they are willing to relax the remittance limits for tax defaulters, and the prospect of increasing fiscal revenue is obviously more attractive.
According to Barclays Bank's calculations on the so-called "extreme scenario", the properties of Chinese investors in Hong Kong alone can bring about 100 billion in tax revenue to China. However, even if overseas investments in other parts of the world can bring tax revenue of similar magnitude to China's public finances, it may still be difficult to fill the huge fiscal gap. China's total debt has exceeded more than 300% of its GDP. "
"Germany must not continue to be naive"
German Chancellor Mertz and French President Macron jointly suggested that when trade conflicts seriously escalate, the EU should have the right to completely exclude relevant countries from the EU's internal market. Economic Weekly wrote about this:
"The target of the relevant proposals is well known to the top political leaders. China's export surplus is so huge that it has turned Germany's export surplus into a joke. Now, European countries are convinced that Beijing has used unfair means. China's excess production capacity is being released into the world market in large quantities, and competitors from all countries are helpless. No one believes that the current situation has anything to do with the market economy.
The German Chancellor, who has always liked to sing praises for globalization and market economy, is no exception. Although Merz still admired liberalism, he also realized that Germany must not continue to be naive.
The newly emerged calls for toughness and doubts mean that there has been a fundamental shift in China policy. In the past, whenever there was a discussion about whether to take a tough stance against China, Germany always acted as a brake because it was too worried about retaliation from China. This worry has not disappeared now, but the German Chancellery has combined this worry with Keynesianism: in the long run, we will all die. But in the short term, we must be brave enough to defend ourselves. "
