Lowtax Network

Back To Top

Country Score

Country Rankings - China

  • Sep 13, 2017   China: intelligence

    The race is on. Russian leader Vladimir Putin said recently that the nation that makes the first major breakthrough in artificial intelligence technology will be the nation that effectively rules the world. And in the meantime we've already seen two countries trying to get a head start on their competitors: China, which has announced the provision of tax breaks for companies investing in AI research; and Thailand, which has unveiled a multi-agency scheme to boost the country's robotics sector. Not that I'm suggesting in any way that the Chinese and the Thais are hellbent on achieving global hegemony. But Putin has a point. Scientists and philosophers are currently speculating what a future with AI would mean, and the more pessimistic among them warn that it could be the next trigger for a major global conflict. While this isn't the forum for a profound discussion on the future of mankind, advances in technology do have major implications for the world of taxation. If, as is widely predicted, robots and AI do take over many of the tasks now being performed by human beings, how will that affect tax bases? The pay people receive for performing tasks is typically subject to one form of tax or several. But no more work means no more income, and, possibly, no more income tax. It might be the case that we are headed towards the long-anticipated (by some) "leisure society," where jobs in the traditional sense will be a thing of the past, and governments provide a universal basic income. But it still begs the question: where the money will come from? Should we tax the robots? Is it possible to tax a robot? How would a robot react to being taxed? Why can't I get images of Terminator 2 out of my mind...?
    Source: https://www.tax-news.com/news/China_To_Support_AI_Sector_Through_Tax_Breaks____75192.html

  • Sep 01, 2017   China: progress

    China may have been upbraided by the International Monetary Fund earlier this month for the lack of progressivity in its personal income tax regime – how ironic that a country run by communists has, according to the IMF, the highest level of income inequality in the world. However, in many other ways, China seems to be making good progress in adapting its tax system to the demands of today's economy, including with proposals to improve tax incentives for scientific research. Value-added tax has now been extended to all areas of the economy, and earlier this month, Chinese Premier Li Keqiang said that reform of the VAT regime would continue. VAT has already saved businesses an estimated CNY1.6tn (USD239.8bn) since its introduction, the Ministry of Finance said. It was also announced recently that China is to allow foreign investors to defer tax on dividend income if it is reinvested into approved projects through an increase in the areas of the economy that foreign investors can participate in, via a reduction in the industries covered in China's "negative list" of precluded investment. China also dished out CNY1 trillion worth of tax cuts in the first half of this year alone, with businesses having seen tax savings worth CNY2 trillion during the four years between 2013 and 2016, Li claimed recently, adding that further reforms are planned to reduce the discretion of tax authorities and prevent arbitrary taxation. This last point could be of particular significance for foreign enterprises operating in China. Deloitte's 2017 Asia Pacific Tax Complexity survey showed that there was a sharp contrast in respondents' views on China's tax regime, with some viewing the country's tax environment as predictable, but others unpredictable, reflecting the fact that taxes tend to be administered and collected at local, rather than central, level. So, one's experience with the Chinese tax system can vary depending on the local tax office's interpretation of tax legislation and regulations, which in a country China's size is not conducive to predictability. As to the tax compliance burden, other surveys suggest that China has a long way to go before the tax regime can be considered even remotely simple. However, it would appear that good progress is being made.
    Source: https://www.tax-news.com/news/Chinese_Tax_Incentives_To_Support_Scientific_Research____75071.html

  • Jul 11, 2017   China: impressive

    Some countries procrastinate endlessly over tax reform (naming no names), while others get on and do it. Like China. Of course, major legislative reforms are a lot easier to undertake when politicians are singing from the same hymn sheet, as they are in China's one-party state. Nevertheless, China has managed to reduce business taxes by almost USD150bn this year alone, and that is an impressive achievement. The bulk of these tax savings have come from the replacement of the Business Tax regime with a value-added tax, and it is to be hoped that a similar reform in India will produce similar results. There, numerous inefficient indirect taxes have been subsumed by the long-awaited goods and services tax, which was finally introduced on July 1, 2017.
    Source: http://www.tax-news.com/news/Chinas_Recent_Business_Tax_Cuts_Worth_USD147bn_This_Year____74655.html

  • Dec 13, 2016   China: streamlines

    In a similar vein to Italy, it could also be said that China's ongoing reforms have not been terribly effective. Otherwise it wouldn't find itself in 137th place in the Paying Taxes index. Indeed, where China is concerned, company executives seem to think that the legal framework is becoming less predictable, if the results of PwC's Doing Business in China survey are anything to go by. This found that businesses are more concerned about their ability to interpret regulations and anticipate costs, with only 12 percent of China/Hong Kong CEOs more confident today in forecasting compliance or tax liabilities compared with 16 percent who shared the same view last year. However, despite a more difficult operating environment, exacerbated by rising costs and slowing economic growth, China remains the market everyone wants to crack. For US companies, it is worth USD400bn, according to the US China Business Council, so foreign investors aren't going to turn their backs on the Middle Kingdom in a hurry. Now, it would be mischievous of me to compare bureaucratic Brussels with Communist China, but there are also parallels between the EU and China. Legal reforms are largely driven by unelected officials who could be accused of being distant from the people and businesses that they claim to be helping. And despite a long-standing commitment to removing regulatory and tax barriers to the single market, I suspect few would say that doing business in the EU was a seamless experience. The EU is also attempting deep reforms to the bloc's VAT regime, and last week the Commission announced with much fanfare new proposals designed to ease the VAT compliance burden on e-tailers as part of its much vaunted digital market strategy. However, before we get too excited about the changes, perhaps we should remember that the EU's track record in this area isn't brilliant. Just ask the micro-business owners who shut down in the wake of changes to place-of-supply rules for suppliers of electronic services.
    Source: http://www.tax-news.com/news/Chinas_VAT_Rates_To_Be_Streamlined____72914.html

  • Nov 16, 2016   China: plugged in

    It's fairly safe to assume that the US won't be ratifying the TPP anytime soon, leaving the treaty's fate uncertain (although there's nothing to stop the remaining participants from making a decent fist of it, or even plugging into the expanding network of Asian FTAs). And things aren't entirely bleak for supporters of free trade. The World Trade Organization recently announced that tariff cuts under the expanded Information Technology Agreement are well advanced, especially after China submitted its ITA expansion commitments to the WTO last month. A clutch of major economies has also expressed enthusiasm for doing trade deals with a post-Brexit United Kingdom. However, for the WTO, the number of protectionist measures imposed by members of the G20 group of leading economies remains "a real and persistent concern." Certainly, the 85 new trade-restrictive measures imposed by G20 countries between mid-May 2016 and mid-October were offset to a large degree by the 66 trade-facilitating measures put in place during this period, according to the WTO's 16th G20 trade monitoring report. However, the overall stock of restrictive measures has increased by 5.6 percent compared with the previous report, with the total number of restrictive measures now standing at 1,263. WTO Director-General Roberto Azevedo said progress in eliminating existing measures remains "elusive," and I think we can expect this number to grow in the coming months. Indeed, we seem to be in an era of turning points, and I just wonder also if we are seeing opinion start to form against carbon taxes and carbon pricing schemes. This is despite the number of implemented or planned carbon pricing schemes around the world having almost doubled since 2012, and with revenues from them now worth about USD50bn. The World Bank recently spoke of the "inevitability" of carbon pricing as nations look to fulfill their emissions reduction commitments under the Paris accord. Recent developments suggest that carbon pricing is far from inevitable in certain parts of the world. And again, the election of Donald Trump, a climate change skeptic, is a key development that pretty much assures that there will be no national carbon pricing plan in the US for the foreseeable future. A Trump White House does not prevent state governments from putting in place their own carbon reductions schemes, and some speculate that the US could end up with a "back door" carbon tax if enough states do so. Yet, voters in Washington state have rejected a proposal to introduce America's first pure carbon tax, and other states hardly seem to be in a hurry to tax greenhouse gas emission either.
    Source: http://www.tax-news.com/news/Trade_Taxes_On_IT_Products_Falling_WTO_Says____72637.html

  • Oct 12, 2016   China: impressive

    Of course, the development of China's finance sector is no accident. There's a plan at work, and as is almost always the case, it's the Government's plan. Nevertheless, the figures quoted in the report are still impressive, especially when you consider that China began building a modern financial system less than 30 years ago. According to the report, there are now 1,500 financial institutions in Shanghai, and the city's stock market ranks second in the world in terms of trading volume, and fourth in the world by market capitalization. Other Chinese cities have also emerged as notable financial centers (there are now five in the top 50). For instance, Shenzhen, which also has a stock market, is the country's second largest financial center, and often plays the role of a testing ground for China's financial and economic reforms. Shenzhen also has a collaborative relationship with nearby Hong Kong, with both places feeding off each other to a large degree. However, there is also the perception that China's financial centers could become as much rivals to Hong Kong as collaborators in the future, especially since the central government has created and continues to expand a series of financial and trading free zones across the country, offering businesses various tax and employment law concessions. As I wrote here recently, the notion that Hong Kong is in decline as a financial center is very premature, and probably wrong. Nevertheless, in relative terms, it now represents a smaller portion of the region's overall financial pie than it did, say, a decade ago, and the Financial Centres Index shows that it is not completely invulnerable to competition.
    Source: http://www.lowtax.net/news/Chinas-Free-Trade-Zones-To-Ease-Work-Permit-Rules-72377.html

  • Mar 29, 2016   China: progress

    The legal and political uncertainty that is often an unfortunate by-product of democracy is not something that affects China, where the Party is firmly in control, and is likely to remain so well into the future. And with no party politics to get in the way, the Government is free to carry out reforms that – at least, in theory – are in the country's best interest, including in the area of taxation. Indeed, China has made commendable progress towards the modernization of its tax system, a fact recognized by the International Monetary Fund, which is supporting China's tax reform agenda. However, despite its rock-solid political stability, China is not the easiest country to do business in for a foreign investor. For westerners, there are the obvious cultural and languages difficulties to overcome. And while the Chinese Government likes to think of the country as a market economy, in reality the State continues to dominate in many areas of economic life, and obtaining the necessary licenses and other regulatory approvals can be a maddeningly complex and time-consuming exercise for foreign enterprises. Corruption and cronyism has also been a huge problem. Indeed, I was quite taken aback recently to read that almost 250,000 people, including state officials at various levels, have been detained as part of Communist Party General Secretary Xi Jinping's campaign against corruption. According to the IMF, China has made "great progress" in creating a modern tax administration since the early 1990s, but China's tax system is hardly a paragon of simplicity either. China is ranked in joint 132nd place in PwC's Paying Taxes Index, with SMEs facing a plethora of taxes and levies, which push the total tax rate up to 67.8 percent. If this is progress, I dread to think what the tax system was like 20 years ago! Chinese leaders might well look on in bemusement at the western democracies with their endless see-sawing between left wing and right wing governments and conclude that their mode of government is the best. But it could be argued that the single party system is a source of weakness rather than strength. It allows the Government to interfere in the workings of the economy in a way that just isn't possible in the more liberal democracies. And the thought of suddenly being on the wrong side of the Party, having expended resources on a new enterprise, isn't an enticing one.
    Source: http://tax-news.com/news/IMF_To_Support_Chinas_Tax_Reform_Agenda____70801.html

  • Apr 27, 2015   China: freeing up

    Most of us that live in democratic countries are probably thankful that we do. But elections can be a messy business and politicians are apt to promise things they can't deliver, knowingly or otherwise. President George H. W. Bush never really lived down his "read my lips..." pledge after later agreeing to raise taxes, although his detractors do tend to forget that he was rather hamstrung by a Democratic Congress at the time. Still, it serves as a warning to any aspiring leader that you should be wary of promising things that will be difficult to keep. Unless you live in China that is, where the upper echelons of the political elite of the People's Republic don't really have to listen to the people because they're not directly elected by them. This system has allowed the Chinese Government at times to treat the country as a giant laboratory for its tax reform ideas, notably a proposed property tax, which is being trialled in Shanghai and Chongqing, and now free trade zones, also established in Shanghai on a pilot basis, and which will soon be extended to other cities and regions. I suppose the FTZs are a good idea, in that they are designed to encourage foreign investment and mark another milestone on China's slow journey towards economic liberalization. China has a long way to go though. The one-party system is well entrenched and, according to the Heritage Foundation, economically China is still "mostly unfree" with a great deal of ground to make up before it can even be considered "moderately free." As Churchill said, democracy is far from perfect, but it's the best of a bad bunch of systems.
    Source: www.tax-news.com/news/China_Announces_Further_FTZ_Plans____67872.html

  • Dec 29, 2014   China: for not being able to find Paris on a map

    There is one remaining question that niggles me. If everyone is accounted for, then who is left to pull the trigger? Ah, Uncle Sam. But if the Hill takes as little notice of the OECD as China does (it's based in Paris, remember), then not much is going to happen. Few people would by now remember that the OECD got its start as a kind of classy, unbiassed Governmental Research Office, and the odd thing is that turned into an anti-business organization, captured, like all the budding leaders, by the Great Heresy, when you might have expected the opposite. Why then is it that international business has failed to form its own voice in the last 30 years? That's inexplicable. OK, there are all those Pink Wombat Associations, Rotarians, fraternities with Greek names and such-like, but they don't amount to a hill of beans. Not even jelly-beans.
    Source: www.tax-news.com/news/AsiaPac_Tax_Commissioners_Meeting_In_Sydney____66489.html

  • Oct 09, 2014   China: undemocratic

    Another low-tax territory doing very well at the moment is Hong Kong, which has maintained its place at the top table of financial centers alongside New York and London. But as you might have noticed, not all is sweetness and light down on the streets of this Special Administrative Region of China at the moment. The problem is, while Hong Kong and China have a mutually beneficial economic relationship which China is more than happy to maintain under the "one country, two systems" model, the people of Hong Kong have very different ideas to Beijing about how they want to be governed. Since the handover of Hong Kong's sovereignty by the British to the Chinese in 1997, this has been largely swept under the carpet. But the "D" word was always going to be the elephant in the room for the Party. When democracy was promised to the Hong Kong people within 20 years of the handover, 2017 must have felt like a long way off. But now it is almost upon us, and there seems little desire by the authorities to give the people what they want – full democracy. There will be elections in 2017, but in reality this will represent not much more than a pretence of a democratic system, with voters choosing from a list of candidates approved by Beijing. Before the riots erupted, Chief Executive (himself selected by China) was considering ways of broadening the plate of candidates in a bid to appease pro-Democratic law makers who are bound to block the new electoral system in Hong Kong's legislature. But ultimately these candidates will still be assessed according to Beijing's criteria. In truth, the Chinese Government doesn't know how to deal with this situation. History tells us that civil disobedience on the mainland is ruthlessly suppressed. But sending the People's Liberation Army into the streets of Kowloon would be a PR disaster for China as it prepares to host the APEC Summit. President Xi Jinping's strategy appears at the moment to be based on the hope that the protestors get bored with standing around in the rain and eventually drift home. Of course, this is only going to be a temporary solution, and this issue will have to be dealt with one way or another eventually. China's next move could be a very important indeed for the future of Hong Kong.
    Source: www.lowtax.net/news/Leading-Offshore-IFCs-Fall-In-Latest-Financial-Centers-Index-66006.html

  • Sep 04, 2014   China: bullies Taiwan

    Another country attempting to dictate what its neighbor can and can't do is China (the People's Republic of). It's good news that the People's Republic and Taiwan have resumed bilateral trade talks, but Beijing is still insisting that it has the right to tell Taiwan (officially known as the Republic of China) whether or not it can negotiate and sign its own trade treaties. The status of Taiwan is another confusing one for outsiders, since both places claim to be the real China. Taiwan is where the former nationalist Chinese leadership fled in the 1940s after the communist revolutionaries took power, and almost 70 years later the authorities there still consider themselves to be China's legitimate Government, although, sensibly perhaps, Taiwan dropped its constitutional claim on mainland China in 1992. China of course (we're now talking about the People's Republic) disputes this, arguing that Taiwan is a part of the PRC as its 23rd province. However, as Taiwan has become a notable trading nation in its own right, the rest of the world has long since forgotten the pretence that China and Taiwan are one and the same country. Still, there have been consequences for those, often small, countries that have chosen to align themselves diplomatically and economically with Taiwan, usually in return for money. This in Beijing's eyes is tantamount to a declaration of war, although retribution tends to come in the form of severed trade ties rather than military action. Nevertheless, it is quite a sad fact that largely as a result of intimidation by China (the People's Republic of) only 21 UN member states and the Vatican maintain formal diplomatic relations with Taiwan. I'll never pretend to understand the bitter enmity that exists between these two peoples as a result of the Chinese revolution. But surely, as the terrible events of that period in history move out of living memory, it's time for hatchets to be buried? Economic ties have improved in recent years and presumably the potential for increased trade is fairly significant if amicable relations become the norm. The ideologues in Beijing won't have it of course. Although China is to all intents and purposes a capitalist country, it likes to maintain the illusion that it is a communist state and therefore it probably suits the Party to keep the pressure on what it considers a nation of traitors, even if for nothing more than propaganda purposes. Indeed, Chinese warplanes (from the People's Republic) continue to buzz Taiwanese airspace as I write, in the hope of provoking some sort of reaction.
    Source: www.tax-news.com/news/Taiwan_China_To_Restart_Trade_Talks____65457.html

  • Jul 03, 2014   China: on screen

    This week there is a flurry of announcements of new or enhanced tax breaks for movie production, notably in China and California, which already had such incentives, and in independent Scotland, which didn't, since it hasn't existed since 1707, and probably never will again, although the UK does have such incentives. In fact, almost all countries, and sub-countries such as US States, have media production incentives, so one has to ask why? Even in the European Union such incentives are permitted, while many other types of tax break are frowned on or banned outright, although it's true that the Commission normally insists on a "cultural content" test, i.e. your movie must have something Lithuanian about it, if you are shooting in Lithuania. And therein perhaps lies the explanation for the prevalence of such douceurs: they are part of nationalism, which is still a popular sport even while increasing swathes of life become globalized. You can be sure that the French will not pay you to make a movie in English, or the Russians a movie in French. Among the English-speaking nations (an increasing number) that issue doesn't arise, although in China, where there is a booming market for movies in English, the tax breaks are presumably limited to Chinese language productions. There is also a considerable marketing aspect: New Zealand has undoubtedly benefited in spades from its hosting of the Hobbit movies, among others. Logically, then, it is short-sighted for China to limit its support to Chinese-language productions: spaghetti westerns were in English and gave lots of free publicity to Italy (the EU wouldn't allow tax breaks for them of course, not that either the EU or film tax credits existed at that time). The Chinese should definitely allow Clint Eastwood or Gerard Depardieu (who probably speaks good Russian by now) to make thrillers in foreign languages on the Great Wall; but the nationality card trumps all other considerations. Don't expect James Bond to land his Aston Martin in Tiananmen Square anytime soon.
    Source: www.tax-news.com/news/China_Announces_Film_Sector_Tax_Breaks____65093.html

  • Jun 19, 2014   China: loves Hong Kong

    In a week when international attention was focused, apart from the unavoidable World Cup, on the 25th anniversary of the Tiananmen Square massacre, commemorated this year as every year with a candlelight vigil in Hong Kong, it was praiseworthy of China to issue a "White Paper" lauding Hong Kong's economic and financial achievements over the 17 years since it returned to Chinese rule. Of course, having Hong Kong on its doorstep is a massive advantage for China, which can use it as a free-market laboratory, as its own private "offshore" center, and as a source of investment funds via Hong Kong stock exchange listings. A slightly more cavalier commentator might wonder about the extent to which Chinese officials and quasi-state business operators might use Hong Kong as a laundry-basket for their wealth: without Hong Kong, they would find it far more difficult to stash their dollars or renminbis in a safe place, however gotten. Whatever the motivation of Chinese leaders, it is clear that they are going to continue to allow Hong Kong to maintain its independent financial regime. What is not so clear is whether and how they are going to honor their rash promise to allow a form of democracy in Hong Kong by 2017. The place is notably undemocratic at present, although in a completely different way from China. In 1997, 2017 must have seemed a long way off; now, there is not much time left. This week's Beijing pronouncements, alongside the eulogies for the SAR, included a more menacing reminder that Hong Kong is subject to China's political will, which won't have done much for the hopes of the ex-colony's democrats.
    Source: www.tax-news.com/news/China_Supports_Hong_Kongs_Future_Autonomy____64948.html

  • Apr 17, 2014   China: raises the free-trade banner

    In a masterpiece of diplomacy, China's premier said last week that it was "open-minded" about the TPP (Trans-Pacific Partnership), which when you deconstruct it probably means that he is happy for Japan to wreck the chances of a successful TPP by refusing to negotiate on its rice tariffs (778 percent, as I recall). There is a double irony in this, given that Shinzo Abe is in reality quite willing to reduce the tariffs, but doesn't need to play such a valuable card given that the US Congress has already ensured that there can be no further US trade treaties by refusing to allow the Trade Promotion Authority to be reconstituted, and that China on the other hand has been a willing player in the World Trade Organization. What actually puzzles me most is the question of why Japan was ever allowed into the WTO in the first place with such outrageous agricultural tariffs. I know the answer that the high-ups in the WTO will give: the Uruguay Round was never intended to cover agriculture, and it was better to secure free trade in manufactured goods as a starting point, before moving on to agriculture. Well, we haven't moved on, twenty years later, have we? Doing a bit more deconstructing, the real reason that agriculture was excluded is the EU's Common Agricultural Policy. Another irony there is that the CAP was designed in 1955 when agricultural employment in France amounted to 27 percent of the workforce; the figure in 2013 had dropped to 2.8 percent, a reduction of 90 percent. Figures in other EU countries are comparable: yet the beast staggers on. Why? No longer, presumably, because it represents an electoral 3rd rail for French politicians; no, nowadays it is because it amounts to an immense subsidy paid by Brussels to rich landowners, and it is not in the interest of the rulers of France, Communist or Capitalist, to annoy them. In Japan, I suppose, there is still an electoral calculation, while in Washington there is pork, nowadays lightly disguised as party political advantage. More irony: US agricultural employment is below 2 percent of the population (it was 80 percent in 1870 - today's useless but charming piece of information). So now you understand why neither side of the aisle wants trade treaties: the left because protection of (now disappeared) agricultural workers is an article of faith, worth millions of votes in any election (of course they won't be protecting the immigrant Mexicans who actually do need protection); and the right, because the owners of agriculture fear competition from poorer countries and their campaign contributions would wither away in the face of a TPA. The final irony after so many others: halfway through his second term, the President, like most of his predecessors, has come to understand that free trade is a Good Thing; but after spending six years making sure that it can't happen, he is now tied down by his own policies.
    Source: www.tax-news.com/news/China_OpenMinded_On_TPP____64347.html

  • Apr 10, 2014   China: helps small traders

    China announced a further package of tax cuts to benefit SMEs, extending previous reductions in income tax and VAT exemptions. That's presumably good news for would-be businesspeople, although it's difficult to tell from a distance how far Chinese entrepreneurs are tormented by bureaucrats, as is the case for small businesses in Europe and America. All governments make great play of their support for SMEs, but in most countries the reality is very different from the hype, at all levels of existence. The average Western small business would definitely regard its central government, its local government and the tax authority as being a well-armed and vindictive set of bandits determined to prevent it from succeeding in the market-place. The panoply of difficulties confronting a would-be start-up in most countries includes at least the following: a raft of administrative requirements (register your business, comply with health and safety and environmental rules and licensing regimes depending on the sector); a fight with the tax authority, which will try to prevent you from being self-employed and deducting legitimate expenses from your turnover; disadvantages of a VAT regime which prohibits you from reclaiming "input tax" until you have already a significant turnover; obligation to pay property taxes, income taxes and other state imposts before being able to generate profitable turnover; restrictive labor legislation preventing you from hiring and firing staff according to circumstances and which gives significant advantages to workers as against bosses. Not surprisingly, faced with such difficulties, many entrepreneurs turn to the black and operate their businesses in a cash-driven space outwith the conventional business arena. This leads the authorities to regard business-people as proto-criminals, and cranks up a vicious circle of repression against start-ups that ends by totally defeating the avowed purpose of government. It takes a brave and clever politician to understand the need to step back and allow entrepreneurial creativity to flourish; and few make the grade. If the Chinese are really doing so, then congratulations to them. In Europe you will look in vain for a country which is even 10 percent of the way towards such an enlightened position.
    Source: www.tax-news.com/news/China_Announces_Further_Tax_Break_For_Small_Business____64267.html

  • Apr 03, 2014   China: edges towards believing in trade

    One swallow doesn't make a summer, but two are a bit more promising, and that's what we are seeing in the EU/China tradasphere, with harmony breaking out on the oenophile and polysilicon fronts. In a parallel WTO case, over China's rare earth export policies, the country is left looking rather battered after an investigation, and said mildly only that it "regretted" the decision against it. The US, on the other hand, continues to present a hard front towards China over its trading policies for solar energy exports. What's really going on here is a battle between pro-trade and protectionist factions in the various regions involved. Any given short description of the batteground is going to be over-simplistic, but with that in mind, let's try to disentangle some of the threads of these ongoing trade wars. In each of the three countries (we'll allow the EU to be a country for today) there is a governmental organization which is responsible for the conduct of international trade affairs. The situation is simplest in China, where the Ministry of Commerce has the conduct of trade spats, and fairly and squarely represents the interests of China's business sector. In China there is very little in the way of producer-capture, because there is apparently little if any divergence of interest between political and business bosses. This may have unfortunate conequences in terms of corruption, but at least as regards trade it has the beneficial result that there is an identity of interest between the two factions, ensuring that the government behaves in a pragmatic way towards its international trading partners. Next least complicated, perhaps, is the EU, where responsibility for international trade negotiations is vested with the European Commission's Trade Commissioner, Karel de Grucht. As it chances, he seems to be in favor of trade (it wouldn't necessarily have been so - imagine if he had been French) and he can directly control and influence international discussions in the context of WTO trade spats. He has achieved a number of successful resolutions by brokering direct discussions between EU and Chinese producers; and agreements of this type seem to bypass neatly both the EU Council (Heads of Government) and the EU Parliament (Heads Of Doctrinal Economic Insanity).
    Source: www.tax-news.com/news/EU_China_Agree_Remedy_In_Wine_Dispute____64132.html

  • Jan 30, 2014   China: on the wing

    This seems to be open season for China-bashing: you can't turn on the TV or peruse a business magazine without being told that it's all going wrong for the Middle Kingdom. Our own news service reports sadly that tax collections rose "only" by 10 percent last year instead of 12 the year before, while growth was "only" 7.7 percent in 2013. And the saintly Economist this week would have you believe that Western investors are leaving China in droves because of the adverse business environment. No doubt that accounts for the fact that FDI in China in 2013 was nearly USD120 billion, up 5 percent on 2012. It's all wishful thinking, as far as I can see, a bit of hopeful schadenfreude, based on commentators' inability to face the contrast between China's rude health and the gritty reality in "Western" countries. I am put in mind of Dr Johnson's observation that "a man who is tired of London is tired of life." I wonder how a portfolio of companies would fare based on the principle: buy when they invest in China and sell when they leave. I am not licensed to give investment advice, of course, so it's just futile jabber. Don't pay any attention to me!
    Source: www.tax-news.com/news/Chinas_Tax_Revenues_Rose_By_98_Percent_In_2013____63473.html

  • Nov 07, 2013   China: invests

    Despite occasional mis-steps, such as over solar panels, and the little "misunderstanding" between the US and Europe over phone bugging, you've got to hand it to the EU on the free trade front. A Commission Vice-President weighed in this week in support of the TTIP (Transatlantic Trade and Investment Partnership), and talks continued both on an investment agreement with China, and a free trade agreement with Japan. Full marks for trying, but one has to be sceptical about the chances for all three of these deals to come to fruition. Of the three, perhaps the most likely to work out is the China investment deal: it's a fact that current levels of investment between the two parties are extremely feeble, although the figures given by the Commission may underestimate triangular flows, for instance through Hong Kong into China and via such as the British Virgin Islands into the EU. At all events, this is definitely a win-win situation, with few vested interests standing in the way, something you cannot say of the TTIP, where entrenched backwoodsmen on both sides are holding their fire until they can see the whites of their enemies' eyes. I wouldn't want to equate the US Democrats with the European Parliament in too many respects, but it's fair to do so in terms of their ability to spoil trade deals.
    Source: www.lowtax.net/asp/story/front/EU_China_Hold_High_Level_Trade_Economic_Talks____62504.html

  • Oct 10, 2013   China: sets the pace

    There has been some criticism of the Chinese Government for not being bolder in its formulation of the country's first pilot free trade zone in Shanghai, which will ease restrictions on RMB convertibility, financial and insurance services, trade and investment. Others see the Shanghai experiment as amounting to competition for Hong Kong; but the SAR itself sees matters more clearly, and has welcomed the plan, saying that it will help to deepen economic integration between Hong Kong and the Mainland, while bringing more business opportunities to related industries in Hong Kong. That word "pilot" is highly significant: in this, as in other reforms, China has proceeded cautiously with the regional introduction of reforms befor launching them nationally, most recently with its expansion of VAT, which is eventually to replace the counter-productive business tax altogether. If the Shanghai program is adopted over large parts of the country, as the Government says it intends, that will amount to the most sweeping liberalization measure so far in China's long march towards capitalism. Far from seeing Hong Kong as an excresence on the pure damask skin of the Chinese economic model, the Beijing leadership seems to want to emulate it – nationwide. The consequences will be scary for Old Europe and other parts of the world which are stuck with a 19th century industrial structure and polity they can't seem to shake off.
    Source: www.lowtax.net/asp/story/front/Hong_Kong_Welcomes_Launch_Of_Shanghai_FTZ____62229.html

  • Aug 01, 2013   China: being pragmatic

    Meanwhile China has responded in what seems to be a highly practical way to weakness in its growth path, if a 0.2 percent reduction in growth from 7.7 to 7.5 percent can be called weakness. Broadly the measures are aimed at removing barriers to the flow of trade, but they also include some actual tariff cuts. An exemption from VAT and business tax for SMEs with annual turnover below about USD35,000 seems particularly helpful. The new Chinese leadership, whatever their political credentials, certainly seems to be off to a good start in economic terms. They also made progress this week on a trade deal with Australia, which has just been revivified after eight years of stop/go talks. China said that Australia had made constructive proposals, while Australia said it was "committed to reinvigorating FTA negotiations with China and delivering an agreement which offers greater prosperity for both countries."
    Source: www.lowtax.net/asp/story/front/China_Takes_Measures_To_Increase_Trade____61540.html

  • Jul 11, 2013   China: means trade

    Another week, another superlative for Hong Kong, this time for the nth successive increase in the number of foreign and Chinese companies setting up there. Every year, there are more businesses, more people, more profit, more capital and more capitalists in Hong Kong. What are the limits? It all depends on Mother China, obviously; but Mother China is nothing if not pragmatic, and is most unlikely to upset the golden apple-cart. You have to wonder, under your breath, how many of China's great and good have personal financial interests in or through Hong Kong. It's a bit like the UK Government and the Channel Islands, or even Washington and Delaware. Nothing illegal, of course; but with all the pressure there is on super-cleanliness, there must be a lot of prominent figures in Europe and the US thinking hard about their untransparent international business interests. Not followed by the Chinese, perhaps, because why would anyone worry about having a Hong Kong connection? Curiously, the main threat to Hong Kong's stability may come from the SAR's huddled masses of unfranchised (mostly Chinese) citizens. Yet, why would they want to push it to a crunch, any more than the Bejing bosses? Revolutions normally need a large constituency of oppressed have-nots, and that's hardly a good description of Hong-Kongers. So the city-state, as it used to be called, will in all probability continue on its path of turning its corner of China into a world-beating semi-democratic megalopolis, with the distinctions between the city itself and its "Chinese" environs becoming ever harder to discern. No doubt it's silly to think of such a tiny region of such a massive country as leading the way towards a new Chinese paradigm. But not that silly.
    Source: www.lowtax.net/asp/story/front/China_South_Korea_Push_On_With_FTA____61309.html

  • Apr 04, 2013   China: planning a communal rice bowl

    How seriously should we take the free trade agreement negotiations between China, Japan and South Korea? Stick two pins in a map of the world, and you'll probably find that the two countries concerned are involved in one or more trade agreements, either in place or being negotiated. There are only a few hold-outs from the secular process of minimizing or abolishing cross-border obstacles to free trade; North Korea springs to mind. The WTO has 159 members and there are 24 countries in the waiting room (observer status), while the United Nations has 193 members, leaving only ten nations which aren't aspiring to belong to both. Then there is a bewildering number of regional trade groupings, amongst which the EU, NAFTA, MERCOSUR, ASEAN and CARICOM are obvious examples; but there are lots of others. Recently the Trans-Pacific Partnership (TPP) has been in the news; Japan has applied to join it, but neither China nor South Korea has yet applied to join. None of the three countries is a full member of ASEAN, but in "ASEAN + 3" the "3" are China, Japana and South Korea. All three are members of the WTO, of course. All three are also members of APEC, whose members are negotiating the FTAAP (Free Trade Agreement of Asia Pacific); at least they look as if they are, but there may be more heat than light. South Korea has free trade agreements with a number of major countries, most famously with the USA (KORUS) and the EU; one with Canada is under negotiation. Japan's negotiations with Australia for an FTA have been dragging on since 2007; but just last week Japan opened negotiations with the EU for an FTA. China meanwhile has FTAs with a scattering of smaller nations including New Zealand, and has an FTA with ASEAN. Ten years ago, apart from WTO involvements, none of our three countries seemed that interested in pursuing more thorough-going trade agreements; but based on their recent behaviour you have to allow that they have apparently changed their spots, and are giving at least lip-service to the idea of extensive free trade, even in so-called "sensitive" areas like agriculture. Are they serious? Japan's import tariff on rice is – wait for it – 778%!
    Source: www.lowtax.net/asp/story/front/China_South_Korea_Japan_Make_Tripartite_FTA_Progress____60276.html

  • Mar 21, 2013   China: wants another Hong Kong

    Not content with one Hong Kong, China is trying to build another one just across the border in Shenzhen on a patch of reclaimed land at Qianhai. It's not going to be very large, at least in territorial terms, but may be a kind of offshore onshore, tax privileged, with foreign financial institutions allowed to set up there and lend in Renminbi to Chinese companies in the zone at unregulated interest rates. So I suppose it will be a brass plate paradise, with umpteen banks and umpteen Chinese holding companies busily doing megabucks of electronic business with each other. They are planning a city of 800,000 people, though. What it shows is that the Mainland's rulers are serious about financial liberalization, wanting to internationalize the Renminbi, and unhappy with the existing domestic financial structure which boasts bloated banks lending at inflated rates to basket-case borrowers.
    Source: www.lowtax.net/asp/story/front/China_Develops_MainlandHK_SEZ____60079.html

  • Feb 07, 2013   China: is Chinese and so is Taiwan

    If the long-lasting and far-from-resolved enmity between Mainland China and Taiwan is a cup half empty, the progress being made with their ECFA (Economic Cooperation Framework Agreement) is a cup half-full. The thing itself was quite surprising when it happened, and subsequent attempts by both parties to implement it and even extend it have been quite reassuring, especially in a region which is subject to multiple cross-border tensions, second perhaps only to the mid-East in terms of scariness. Between them, China, Japan, the Koreas, Myanmar, Vietnam, Laos and Thailand have more hatchets than you shake a stick at. In fact, it has been a good week on that front, with Japan actually sidling up to China in a more-or-less friendly fashion. Chinese Taiwan, almost-Chinese Singapore and even more so, Chinese Hong Kong stand out for being focused on business rather than national rivalry. I know it's heresy to say so, but wouldn't Taiwan be better off if it had Hong Kong's freedoms within a Chinese envelope, so to speak? The Mainland is moving at a glacial pace towards permitting full democracy for Hong Kong; wouldn't it make sense for Taiwan to agree to say a 20-year process of re-integration into China, with all the reassurances that Hong Kong has of economic independence? Taiwan's economy would benefit enormously. So what stops it?
    Source: http://www.lowtax.net/asp/story/front/Taiwan_China_TwoWay_Investment_Encouraged____59512.html

  • Jan 24, 2013   China: figures

    China comes out well from a new analysis of international trade flows conducted by the WTO and the OECD. These unlikely bed-fellows (the OECD believes that the more tax, the better, while the WTO believes the opposite) show that on a 'value-added' basis, China's trade surplus with the USA falls by 25%. The size of the trade surplus has always been one of the US administration's main complaints against China, along with its supposedly over-valued currency. So, with statistics you can prove anything; but this is actually very thought-provoking. If a gadget that goes into a Chinese mobile phone that is sold into the US was produced in the Philippines and further processed in Vietnam before being assembled into the phone in Ghangzhou, then it may be taxed three times before arriving in Philadelphia, depending on the presence or absence of trade treaties between the various country pairs, and it's the gadget's final value that will find its way into the China/US trade figures. Another myth that such figures call into question is the role of 'offshoring' in worsening the trade surplus. If a US company produces the gadget through its subsidiary in the Philippines, albeit the profits remain deferred from the IRS's perspective, is this not better for the US than if an indigenous Filipino firm produces the gadget and sells it to Vietnam? Comparative advantage can't be wished away, and it's wrong even to try.
    Source: http://www.lowtax.net/asp/story/front/Reducing_Trade_Taxes_Supports_Competitiveness_Says_Study____59249.html

  • Nov 29, 2012   China: to melt down its iron rice bowl?

    As suggested in our news round-up, the FTA negotiations just starting between China, Japan and South Korea can be seen as a riposte to the American-led Trans-Pacific Partnership; but hey!, there are no bad FTAs, and this competition, if that is what it is, creates a virtuous circle of progress towards a tariff-free region. The TPP already has whiskers: originally (2005) it was a local affair between New Zealand and some of its Pacific neighbours, but for the last five years it has been much grander. China is staying aloof from the TPP, but South Korea is joining the fun, and Japan has said it wants to take part as well. But the TPP has just held its fifteenth round of negotiations, and the bigger it gets the further off seems any outcome. A touch of the Dohas, you might say. Perhaps the Japanese are just being cunning and are intent on spoiling the party? But when you look at how long it took the US Congress to ratify KORUS they probably needn't worry. The tripartite grouping is more real though: South Korea has some of the best free-trade credentials around, and will drive the negotiations hard. The sticking point will surely be the Japanese agricultural lobby? Presumably they have thought of that, so you have to assume that they are aiming for a limited agreement covering a number of industrial and perhaps financial sectors, with agriculture, fishing and other 'sensitive' sectors to follow along later. Fishing, gulp: they'll have to sort out the Spratlys and the rest before there's much chance of ratification in the Diet. It's trade that drives progress in human affairs, you see. If South Korea and China encircle North Korea in trade terms, how long could even that rogue state hold out in its ruinous anti-capitalist obsession?
    Source: http://www.lowtax.net/asp/story/front/China_Japan_South_Korea_To_Start_Trilateral_FTA_Talks____58395.html

  • Nov 22, 2012   China: pumps up the stock market

    The Middle Kingdom (when did you last hear it called that?) has just changed its leadership in its normal obscure, shadowy and woefully undemocratic fashion, and it will receive no accolade from me in that respect; but if the new team is behind this week's reduction in dividend withholding tax then it is off to a good start. The men in dark suits and red ties say they want to support investment in the stock market, while punishing speculation. Why is it that governments hate speculators? All economists nowadays (well, perhaps not in Beijing) agree that speculation is a good thing because it reduces volatility in markets, letting off steam if you will, and correcting disparities in the prices of - well, just about everything. But governments are control freaks, for ever seeking to 'control' the market. Just this week, Hong Kong (a part of China, after all) is trying to control its property market through taxation; why doesn't it use all that cash to build a few more islands in Kowloon Bay, or buy some land from mother China? Well, partly because Beijing is swimming in cash already despite its ever-weakening economic indicators; they were brand new, those suits and ties, did you notice? Savile Row? Brooks Brothers? Surely not 'Made In China'?
    Source: http://www.lowtax.net/asp/story/front/China_Restructures_Its_Dividend_Tax____58344.html

  • Nov 15, 2012   China: ups its measly investment quotas

    I suppose that I should give a rather grudging accolade to China for increasing its quotas for foreign investment in its securities markets. China has also loosened the entry requirements into the program; but you still have to be a large organization to have any hope of qualifying. Grudging, because even after the increases it only permits a total of USD150bn of such investment, which amounts to a miniscule 1.7% of stock market valuations, compared with a comparable figure in South Korea of 36%. This whole program seems perverse: surely the Chinese are not still somehow defensive about capitalism, when they are currently the world's most successful capitalist economy? Do they really fear that US investment banks (yes, there are still one or two left) are out to get them? Take over their precious assets as if they were Ming vases and carry them off to Wall Street? Business investment is a totally different matter of course, with vastly bigger amounts sloshing around. If I was in charge, I would be far more worried about foreign investment in productive assets than about the Emir of Qatar owning 5% of a local bank.
    Source: http://www.lowtax.net/asp/story/front/China_To_Improve_QFII_And_RQFII_Programmes____58192.html

  • Sep 20, 2012   China: disgracing themselves over trade

    China and the United States are at it hammer and tongs, squaring off for a long-term battle over subsidies, dumping and countervailing measures. It's difficult to say which is more to blame, so I'll blame both of them; and I'd give an execration to the EU as well if it was a country, because it's playing the same game. You can stop reading now if you believe in free trade, and understand why dumping doesn't exist but had to be invented by politicians for electoral purposes. For those who still need convincing, here it is, it's very simple: if Country A can produce widgets more cheaply than Country B, because of having cheap resources (materials, labour etc) then Country B should happily accept those cheaper widgets because it will then either be able to improve the standard of living of its citizens or will in its turn be able to make cheaper cars, or whatever else the widgets go into. And this is true even if Country A deliberately underprices its exports: Country B should smile, and say, thank you very much. Only if Country A systematically sets out to wreck an industry in Country B for long-term competitive advantage is there a case for intervention. That's unusual, and what stops free trade operating is most usually an entrenched labour force, whereas the correct response for the country concerned is to re-train the people affected, not protect them, which simply exacerbates the problem. You can see why politicians, with notoriously short horizons, fail to behave as they should, and prefer instead to go to war. At least nowadays it's usually just with words.
    Source: http://www.lowtax.net/asp/story/front/China_US_Exchange_Trade_Dispute_Blows____57373.html

  • Aug 02, 2012   China: is becoming more open

    Perhaps I shouldn't be rewarding countries for relaxing regimes that should never have been there in the first place, but that would rule out just about 100% of tax reductions, so I'm going to go ahead and award China an encomium for its continued opening up of inward investment, coupled with gradual freeing-up of trading in the renminbi. There are still tight limits on who can invest in the country's financial markets, and how much, and into what; these all need to be removed asap, but in the meantime let us welcome limited progress.
    Source: http://www.lowtax.net/asp/story/front/China_Publishes_Regulation_To_Relax_QFII_Rules____56586.html

  • Jun 28, 2012   China: another small step towards a brighter future

    As the anniversary of the Tiananmen massacre reminds us, there is much that is unpalatable or worse about China, but any opening up is progress of a kind towards a better future, so we must welcome the loosening of the QFII rules which will allow a considerable expansion of foreign portfolio investment in the country, and marks another step on the road towards convertibility of the renminbi. It is trade, whether in goods or in money, that is the precursor of individual liberties (one of the main arguments for free trade), and who can deny that China's booming economy has brought benefits to its people, oppressed as they still are in many respects?
    Source: http://www.lowtax.net/asp/story/front/China_Lowers_The_Bar_For_Foreign_Institutional_Investors____56031.html

  • Jun 07, 2012   China: having its cake and eating it

    The Middle Kingdom. For any company, just about, at least for any company of significant size, it can't be ignored, and it is a source of riches either directly through selling Western gizmos to newly affluent Chinese, or indirectly as a source of cheap production inputs. But the Chinese are no pushover, and the days when they laid down a red carpet for Western investors are well and truly over. As they themselves get stronger in international business terms, and as they start to suffer middle country growing pains, they become more and more difficult to deal with. This week's report from the EU's local Chinese Chamber of Commerce shows just how much tighter the business environment is becoming in China. And it is not to China's credit. Joining the WTO was a brave step, and of course it was in the country's long-term interests. But taking every opportunity to put obstacles in the way of foreign investors is short-sighted. The fact that the USA is equally protectionist is no excuse. In the end, the countries which will do best will be the ones that are open, welcoming and even-handed. China is becoming none of those things.
    Source: http://www.lowtax.net/asp/story/front/European_Businesses_Report_FDI_Regulatory_Problems_In_China____55714.html


« Back to Country Rankings