Are firms paying very high rate of tax?

By Zhang Jun ( China Daily ) Updated: 2017-01-05 07:44:58

A couple of weeks ago, Chinese auto-glass tycoon Cao Dewang sparked a heated discussion across China. Cao said his recent $600 million investment to establish a manufacturing branch in the United States for his company, Fuyao Glass Industry Group, was driven largely by China's high taxes, which he claimed are 35 percent higher for manufacturers in China than in the US. Has the tax burden on Chinese enterprises really reached economically lethal levels?

Going strictly by the numbers, this does not seem to be the case. Measured as the ratio of the government's fiscal revenue to GDP, China's overall tax burden, according to the International Monetary Fund's Government Finance Statistics Manual, is just over 29 percent. That is 10 percent less than the global average.

Another way to measure the overall tax burden is to calculate the ratio of tax revenue and social security contributions to GDP. By that measure, China's average tax burden from 2012 to 2015 was 23.4 percent, or 12 percent lower than member countries of the Organization for Economic Cooperation and Development. As a percentage of GDP, China's tax revenues amount to about 18 percent - compared to about 26 percent of GDP in developed countries and about 20 percent in developing countries (in 2013) - and continues to decline.

Are firms paying very high rate of tax?

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