BEIJING -
The interest tax imposed by the Chinese government
on personal bank savings has been met with
widespread public opposition, a survey reveals.
The survey, conducted jointly by China
Youth Daily and QQ.com, revealed that 93.7% of the
6,723 respondents considered the current interest
tax "unreasonable".
"It is unfair to
charge us once more with interest tax when we have
already paid personal income tax," a survey
respondent
said.
A 20% tax on
savings interest was introduced in 1999, in a bid
to reduce mounting individual savings.
Seven years on, despite the tax, the
Chinese "hobby" of saving shows no sign of
abating, as China's yuan savings deposits reached
15.97 trillion yuan (US$2.1 trillion) by November,
up 15.3% on the previous year.
The tax has
also failed to stimulate consumer spending, as the
ultimate consumption rate dropped to the record
low of 51% last year.
Opposition to the
tax is getting more vocal every year.
According to Chen Liangwen, an economics
researcher with Peking University, China's high
savings rate is attributable to low consumer
confidence stemming from employment uncertainty,
as well as costly education, housing and medical
care.
"The interest tax levied during the
past eight years has proved not to be useful in
stimulating consumer spending. It is time for a
change," Chen said.
According to Chen,
given inflation and the interest tax, the real
interest rate on bank deposits is virtually
negative.
Facing intense calls for
abolishing the interest tax, some Ministry of
Finance officials argued last year that the total
deposits of the wealthy were far greater than
those of the poor, and the affluent paid more tax.
But some economists disagree.
"The role of
interest tax in coordinating the income gap is
limited," said Zhao Xijun, vice dean of the
Finance and Security Research Institute at Renmin
University of China. "Instead, a more effective
tool is to increase financial input into public
endeavors."
According to Tan Yaling, a
researcher at the Bank of China, the rich have
more investment channels, whereas the poor rely
more on bank savings.
"The tax chips away
at the savings of middle- and low-income families,
whereas those with higher wages are relatively
unaffected," Tan told Beijing Youth Daily.
The government should adopt different
interest tax rates for the rich and the poor, he
said.
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