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    Greater China
     Sep 8, 2011

Moon cakes get an unsavory makeover
By Wu Zhong

HONG KONG - Greedy business people always want to make more profits. In recent years, this has found expression at the Mid-Autumn Festival, the celebration also know as the Moon Festival, where the tradition of giving moon cakes has resulted in more elaborate concoctions and the exposure of scandals over the delicacy's production.

After Shanghai-based Guanshengyuan, a well-established candy manufacturer in China, was found in 2003 to have made moon cakes with fillings left over from the previous year or recycled from unsold cakes, media investigations led to the discovery of other irregularities. An industrial "secret" was thus discovered that moon cake manufacturers would add anti-corrosives, together with other additives, into the raw materials so that a moon cake could

be preserved for long - and recycled if unsold.

Amid growing awareness and concern with food safety through a succession of similar tainted-food scandals, a psychological shadow has been cast on potential moon cake buyers and the profitable manufacture of the gifts.

In the approach to the festival, which this year falls on September 12, the Chinese government revised a law to more strictly regulate additives used in making moon cakes.

As a result, a moon cake on sale in China will expire within 30 days at the longest, compared to up to six months previously. Still, as some cakes have been found to have overdoses on additives, Hong Kong moon cake makers are benefiting from reports about quality problems with moon cakes made on the mainland. For years, many people in Guangdong province brought their moon cakes in Hong Kong.

Retail sales are just a small part of their business for some mainland Chinese moon cake makers. In past years, savvy producers have built "cooperative" relationships with workplaces - government departments, hospitals, schools or enterprises, as "institutional buyers" of their comestibles.

Each Moon Festival, such institutions would buy large quantities of moon cakes from their "cooperative" suppliers for distribution to staff as bonus gifts - a traditional way for employers to show they care. Until now, this has been standard practice, without causing any problem.

But this year, out of the blue, China's tax authorities have announced that employees receiving moon cakes will have to pay tax, because these bonus gifts are part of their personal income. This has upset the general public and many media commentators who slam the collection of a "moon cake" tax as "unreasonable" or "merciless". On a popular website, over 92% netizens voted against the levy of the "moon cake tax".

But legal experts have stepped forward to justify the levy, saying that whatever one receives from a job, cash or barter, must be regarded as "personal income" and taxable. Some even argue that the so-called "moon cake tax" was not been collected in past years only because the cost for the collection was deemed too high.

So is the cost of collecting the "moon cake tax" not so high now? Not necessarily. More likely, the moon cake zeal is more a reflection of the taxation authorities' concern with the loss of tax revenue on personal income after a revised personal income law took effect from September 1.

The law has sharply increased the minimum taxable personal income to 3,500 yuan (US$548) a month from 2,000 yuan previously. It is estimated that the government annual revenue from personal income tax will fall by 160 billion yuan. The taxman thus must open his eyes wider to find more tax resources. Bonus moon cakes become easy prey because they are being offered right at the time the new law has come into effect.

There may be another reason for China’s taxation authorities to keep a close eye on moon cakes. Last year, a large state-owned enterprise reportedly gave each employee 20,000 yuan as "moon cake fee" for the festival. If they fail to tax "bonus moon cakes", more and bigger "moon cake fees" will be dispatched. So the authorities want to plug this potential loophole.

But why not just simplify the matter and make the public happy by imposing the "moon cake tax" on the employers? Namely, a workplace should be asked to declare the value of the moon cakes, or whatever else, it is about to give as bonus gifts to its employees and then be taxed as business income or profits accordingly.

That way at least the mass of employees could happily enjoy an "after-tax" delicacy with their families under a full moon, while relishing its symbolism for smoothness, satisfaction and perfection.

(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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