*~If I had a star for everytime you brightened my day...I'd be holding the galaxy in my hands~* Your position:Home->china news-> Tax on Interest Hinders Consumer Spending Push Whether or not the Chinese government should abolish its tax on bank savings interest has been a hot topic at the annual National People's Congress for years. A 20-percent tax on savings deposit interest for all renminbi and foreign currency accounts opened by individuals at Chinese banks was introduced in 1999, in a bid to reduce mounting individual savings at the time. Seven years on, the central bank said The Chinese "hobby" of saving shows no sign of abating. The tax on interest failed to deter people from squirreling away their money into savings accounts. Nor did it stimulate consumer spending. Instead, opposition to the tax is getting more vocal every year. The macroeconomic environment has drastically changed in the past seven years, and But supporters of the interest tax argue that the total deposits of the wealthy are far greater than those of the poor, and the affluent pay more tax. They say the money raised from the tax goes to the public. It is true that the total amount of savings held by the wealthy far exceeds that of the poor. But who relies more on bank savings? The rich, in fact, invest more money than they save. Whereas the poor, due to low incomes and limited investment channels, rely more on bank savings to make a living. In this respect, the tax chips away at the savings of middle and low-income families, whereas those with higher wages are relatively unaffected given they have other channels to raise money. Changing Most importantly, Given inflation and the interest tax, the real interest rate on bank deposits has almost become negative for individuals. The interest tax on savings deposits has in fact become an impediment to the growth of consumer spending. (
|