Before Mid-Autumn Festival, many companies give moon cakes or shopping vouchers to employees as holiday gifts. But such income is taxable and calculated as part of an employee's salary. Some media outlets, however, are asking why moon cakes should be taxable under the Individual Income Tax Law, says an article on xinhuanet.com. Excerpts:

Considering moon cakes and shopping vouchers as part of a person's income is in accordance with the Individual Income Tax Law. But people feel it goes against the tradition of giving gifts during festivals.

More people today seem to be worried that taxes are being imposed on almost everything. As taxpayers become more conscious, it is natural that they notice the existence of indirect taxes and question whether certain taxes are reasonable. No wonder, many of them are asking whether it is reasonable to have moon cakes and shopping vouchers under the ambit of individual income tax.

Also, the heated public discussion over "moon cake tax" is centered on the low threshold of personal income tax and the taxation mechanism. Since indirect taxes such as value-added tax are part of the price of products like moon cakes, the public is asking whether it is reasonable to impose individual income tax on them again.

Mid-Autumn Festival is an important traditional festival, but tax imposed on moon cakes, which symbolize the festival, could ruin the cheerful mood during the holiday.

But if gifts such as moon cakes are exempted from individual income tax, it would reveal the loopholes in the tax system, and weaken its secondary allocation function and disturb the tax collection and management order. Therefore, the best solution to the "problem" of moon cakes would be to comprehensively advance the personal income tax system.

(China Daily 08/31/2011 page9)