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China considers social security tax

By Hu Yang (chinadaily.com.cn)
Updated: 2010-04-02 17:30

China's Ministry of Finance is considering levying a social security tax in an effort to narrow the wide gap in income distribution, said a report in Friday's 21st Century Business Herald, citing Finance Minister Xie Xuren.

Xie said in his article published in Thursday's Qiu Shi (Seeking Truth), an official magazine of the Communist Party of China Central Committee, this year will witness personal income tax reform, and taxes will be better applied as a way to adjust income distribution.

China's social security, including pension insurance, basic medical insurance and unemployment insurance, are paid by the State, enterprises and individuals to the social security fund in the form of a "social security fee." Changing the form into a social security tax means the recourses for the social security fund will be broadened.

"It's the first time China raised the issue of social security tax, targeting the existing huge gap in income distribution," said Li Weiguang, professor of Tianjin University of Finance and Economics, adding that the current social security fund collecting system can hardly cover all citizens.

At present, the social security fund is administered by provincial budgets, leading to problems due to uneven regional development and migration.