Chinese Tax Experts Urge Cut in Stamp Tax to Boost Stocks: Report
September 4, 2000 - 0:0
BEIJING Chinese tax experts and economists are urging the government to cut the stamp tax on securities transactions to boost local stock markets, state media reported on Sunday. Lower stamp tax rates would also make the stock markets more attractive to foreign investors, who are likely to arrive in greater numbers after China's entry into the World Trade Organization (WTO), the China Daily Business weekly said.
"China will have to gradually drop the stamp duty rate," Liu Zuo, a researcher at the state administration of taxation, told the paper. "The country's economy will develop further and more foreign investors will join in China's stock markets after our accession to the WTO." Chinese stocks were the world's best performers in the first half of the year, rising 47 percent, spurred by government moves including a cut in the stamp tax last year.
In June 1999, China's securities authorities slashed the stamp tax on transactions in B shares, which are nominally reserved for foreigners, to 0.3 percent from 0.4 percent.
Despite the lower rates, the bull market has caused stamp tax revenues to flood into state coffers. Tax authorities collected 14 billion yuan (1.7 billion dollars) in stamp tax revenues in the first quarter, five times more than in the same period last year. The Chinese government is in greater need than ever of money like that, since it is fighting a battle against soaring expenditure on items ranging from welfare to military hardware.
This year, the public deficit is expected to hit an all-time high of 230 billion yuan (28 billion dollars).
Rising deficits are one reason why the Chinese government might be reluctant to cut the stamp tax further, but local economists do not buy that argument, because lower tax rates are likely to boost transactions, AFP said. "A drop in the stamp duty rate will certainly not result in a decline in stamp duty income," said Yang Siqun, an economist with the Chinese academy of social sciences, the country's top government think-tank. Yang pointed out that value-added tax is a major source of revenue for many Western governments.
A greater emphasis on value-added taxes a taxation of consumption rather than production is one of the ways for China to increase its revenues after WTO entry, the paper said.
Tax officials are preparing new rules that will tax a wider range of goods and services, according to the paper.
"China will have to gradually drop the stamp duty rate," Liu Zuo, a researcher at the state administration of taxation, told the paper. "The country's economy will develop further and more foreign investors will join in China's stock markets after our accession to the WTO." Chinese stocks were the world's best performers in the first half of the year, rising 47 percent, spurred by government moves including a cut in the stamp tax last year.
In June 1999, China's securities authorities slashed the stamp tax on transactions in B shares, which are nominally reserved for foreigners, to 0.3 percent from 0.4 percent.
Despite the lower rates, the bull market has caused stamp tax revenues to flood into state coffers. Tax authorities collected 14 billion yuan (1.7 billion dollars) in stamp tax revenues in the first quarter, five times more than in the same period last year. The Chinese government is in greater need than ever of money like that, since it is fighting a battle against soaring expenditure on items ranging from welfare to military hardware.
This year, the public deficit is expected to hit an all-time high of 230 billion yuan (28 billion dollars).
Rising deficits are one reason why the Chinese government might be reluctant to cut the stamp tax further, but local economists do not buy that argument, because lower tax rates are likely to boost transactions, AFP said. "A drop in the stamp duty rate will certainly not result in a decline in stamp duty income," said Yang Siqun, an economist with the Chinese academy of social sciences, the country's top government think-tank. Yang pointed out that value-added tax is a major source of revenue for many Western governments.
A greater emphasis on value-added taxes a taxation of consumption rather than production is one of the ways for China to increase its revenues after WTO entry, the paper said.
Tax officials are preparing new rules that will tax a wider range of goods and services, according to the paper.