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Interesting development in the new 'foreigner tax' saga
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twilothunder



Joined: 09 Dec 2011
Posts: 442

PostPosted: Sun Jan 08, 2012 1:29 am    Post subject: Interesting development in the new 'foreigner tax' saga Reply with quote

http://www.forbes.com/sites/russellflannery/2012/01/07/shanghai-delays-unpopular-tax-on-foreigners-scmp-reports/

Russell Flannery, Forbes Staff
Shanghai Delays Unpopular Tax On Foreigners, SCMP Reports

Shanghai, one of China’s most important international business hubs, is delaying the local collection of an unpopular new Chinese welfare and pension tax on expatriates working in the country, the South China Morning Post reported on Saturday.

The move by municipal authorities follows criticism by foreign businesses and expatriates that the tax announced by the central government last year amounts to little more than a “money grab” by China’s state pension system, with few if any benefits for expatriates and their employers.

Shanghai, whose U.S. –based investors include GM, Citibank, Corning and Fedex, relies on overseas-backed companies for about a quarter of its GDP. The city’s delay reflects concern that foreign investment in the city would be harmed by the central government’s order at a time of weak international economic growth, the Hong Kong-based paper said.
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Cyberkada



Joined: 04 Dec 2011
Posts: 306
Location: Xi'an, China

PostPosted: Sun Jan 08, 2012 2:30 am    Post subject: Re: Interesting development in the new 'foreigner tax' saga Reply with quote

twilothunder wrote:
http://www.forbes.com/sites/russellflannery/2012/01/07/shanghai-delays-unpopular-tax-on-foreigners-scmp-reports/

Russell Flannery, Forbes Staff
Shanghai Delays Unpopular Tax On Foreigners, SCMP Reports

Shanghai, one of China’s most important international business hubs, is delaying the local collection of an unpopular new Chinese welfare and pension tax on expatriates working in the country, the South China Morning Post reported on Saturday.

The move by municipal authorities follows criticism by foreign businesses and expatriates that the tax announced by the central government last year amounts to little more than a “money grab” by China’s state pension system, with few if any benefits for expatriates and their employers.

Shanghai, whose U.S. –based investors include GM, Citibank, Corning and Fedex, relies on overseas-backed companies for about a quarter of its GDP. The city’s delay reflects concern that foreign investment in the city would be harmed by the central government’s order at a time of weak international economic growth, the Hong Kong-based paper said.


Full article:
Quote:
Shanghai is delaying the implementation of an unpopular order from the central government that requires expatriate workers to join the local pension system.

The Ministry of Human Resources and Social Security’s announcement in October that all expat workers would have to contribute to mainland pension schemes sparked strong opposition from expat employees and foreign-funded businesses.

Foreign workers, who are mostly on the mainland for just a few years and unlikely to collect mainland pensions, are supposed to pay 1,300 yuan (HK$1,600) into a social security fund each month, with their employers contributing more than 4,000 yuan a month.

Business executives are disappointed but say they have no choice but to comply.

However, Shanghai’s municipal government, keen to avoid worsening the pressures faced by foreign businesses amid a global slowdown, is emerging as their saviour, at least temporarily.

Local authorities in Beijing published detailed guidelines soon after the policy was unveiled by the ministry, setting out how the money should be paid into pension fund accounts, but Shanghai’s labour authorities have yet to draw up a similar document.

It means that Shanghai-based companies and their foreign employees do not have to start contributing, just yet.

Bureaucratic inertia is not to blame. Three company executives close to the local regulators say that Shanghai deliberately slowed down the compilation of the guidelines in response to the anger of foreign businesses.

A member of the European Union Chamber of Commerce says Shanghai party boss Yu Zhengsheng and city mayor Han Zheng have privately expressed concerns about the policy, which could put a large dent in foreign investors’ interest in the mainland’s commercial capital when they are already complaining about the high cost of doing business.

Foreign direct investment has played a key role in driving Shanghai’s economic growth over the past two decades. Overseas-funded firms contribute a quarter of the city’s gross domestic product.

However, Yu and Han have no power to overrule the ministry of human resources.

Xu Yanjun, deputy head of the ministry’s National Social Security Management Centre, said in early October that foreigners working on the mainland would need to register with the authorities and, regardless of when they completed that process, start making contributions by October 15. Those registering late would have to make back payments.

Shanghai responded with a wait-and-see approach. It’s not known whether Shanghai officials have lobbied the central government to scrap the rule.

There are more than 600,000 expats working on the mainland and forcing them to participate would pump an extra 3 billion yuan into pension fund accounts. There are about 65,000 foreigners working in Shanghai, employed by everything from global industrial giants to small restaurants.

Shanghai’s labour authorities have cited technical difficulties for setting up a payment collection system, but officials say it is just an excuse for their failure to implement the rule.

As a Chinese proverb says: “Where there is a measure from the top, there is a countermeasure at the bottom.”

The saying is usually used to describe sloppy and irresponsible officials who attempt to take advantage of a lack of supervision by higher-ranked bureaucrats in order to dodge burdensome tasks.

But Shanghai’s countermeasure appears to be in the interests of thousands of foreign businesses and their expat employees, allaying their concerns about a worsening investment climate in the world’s fastest-growing major economy.

“Long-delayed” is a negative term that appears perennially in news stories about reforms announced by Beijing that never come to pass.

Shanghai now has a chance to give it a more positive spin.
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wangdaning



Joined: 22 Jan 2008
Posts: 2167

PostPosted: Sun Jan 08, 2012 3:58 am    Post subject: Reply with quote

I would not trust what is in print by the people at forbes. Cyber's bold on the article shows how little forbes actually knows about the situation (it was obviously numbers based on a certain salary).

It is like the forbes article that claimed Belarus was banning all foreign websites. Pure hogwash. It answers no questions but does a good jobs of muddying it up.
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Cyberkada



Joined: 04 Dec 2011
Posts: 306
Location: Xi'an, China

PostPosted: Sun Jan 08, 2012 8:05 am    Post subject: Reply with quote

wangdaning wrote:
I would not trust what is in print by the people at forbes. Cyber's bold on the article shows how little forbes actually knows about the situation (it was obviously numbers based on a certain salary).

It is like the forbes article that claimed Belarus was banning all foreign websites. Pure hogwash. It answers no questions but does a good jobs of muddying it up.


The original article wasn't Forbes. It was in the South China Morning Post. Being Hong Kong based, they certainty know the situation here.
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igorG



Joined: 10 Aug 2010
Posts: 1473
Location: asia

PostPosted: Sun Jan 08, 2012 9:42 am    Post subject: Reply with quote

I think that this development has been anticipated rather than it is interesting now. Because this country's system is dictatorial, the only course of action people and media can follow is such "news" and articles as the one above.

Quote:
wangdaning
I would not trust what is in print...
Would it be more trusted that all foreign companies and foreign workers on mainland China are lining up to pay the tax?

My observation is that the country's leadership may not be on the same page and that party members are divided on varieties of issues. A few authoritative individuals in Beijing may no longer have as much power as they have enjoyed before. With the booming businesses in a few areas of the country, there may be growing a strong opposition to reckon with. Guangzhou, for example, is another city that has plenty of influence on the country's economy too.

The new tax is ridiculously introduced and given the circumstances it also is unjust to foreigners in the country. If such articles aren't printed and if local governments do not speak up, Beijing will only continue to enjoy its dicatorship.
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wangdaning



Joined: 22 Jan 2008
Posts: 2167

PostPosted: Sun Jan 08, 2012 11:43 am    Post subject: Reply with quote

igorG wrote:

The new tax is ridiculously introduced and given the circumstances it also is unjust to foreigners in the country.


No was or will be, is there some info we don't know about. I don't see how it is particularly unjust. It has been noted over and over on this board that foreign workers in most countries pay into the benefits scheme. I understand not being happy about it but to pretend it is unprecedented is a joke unto itself.

In the future please do not misuse quotes. I clearly pointed to forbes as a non credible source. Cyber then made it clear it came from SCMP. I did not say don't trust what is in print. Either way their numbers are off and make them look ridiculous.
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steve b



Joined: 31 May 2011
Posts: 293
Location: China

PostPosted: Sun Jan 08, 2012 11:52 am    Post subject: Reply with quote

Wang, people who pay in other countries actually benefit from the system. Please tell us what exactly we would gain by being at the party - other than staying 15+ years and retiring here?
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Lobster



Joined: 20 Jun 2006
Posts: 2040
Location: Somewhere under the Sea

PostPosted: Sun Jan 08, 2012 12:03 pm    Post subject: Reply with quote

It's not that I particularly mind paying into the system. What I do mind is being expected to contribute the equivalent of the average monthly wage of a Chinese person. Keep it at a reasonable level (e.g. 500/mo) and folks won't be griping so much. A sum of 5k per month isn't a contribution, it's a head tax.

RED
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steve b



Joined: 31 May 2011
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Location: China

PostPosted: Sun Jan 08, 2012 12:11 pm    Post subject: Reply with quote

The criteria is 11% from the employee, which my rudimentary mathematics tells me on a 5K monthly salary the deduction would be 550y.
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Lobster



Joined: 20 Jun 2006
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PostPosted: Sun Jan 08, 2012 12:28 pm    Post subject: Reply with quote

True, but I don't make 5k a month. I'm also including the employer's part of the contribution in my figures. I won't pay any of it since my pay figure is net.

RED
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Cyberkada



Joined: 04 Dec 2011
Posts: 306
Location: Xi'an, China

PostPosted: Sun Jan 08, 2012 12:36 pm    Post subject: Reply with quote

steve b wrote:
The criteria is 11% from the employee, which my rudimentary mathematics tells me on a 5K monthly salary the deduction would be 550y.


and 1500 for those making 16K or so... NOT to mention the employer costs of 37%. I guarantee unless you are one of those golden FTs, or will be willing to take a huge pay cut, your job here is in danger.

Shanghai has it right. Many, many foreign companies will leave and relocate to VN, PH, TH and even back to the West. FedEX is even planning to move BACK to the Clark Freeport from Shanghai if this comes to pass, and many Western companies plan of taking their manufacturing facilities out of China as well. So good-bye to the Chinese export-based economy. The cost of doing business just became too high.
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steve b



Joined: 31 May 2011
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PostPosted: Sun Jan 08, 2012 12:45 pm    Post subject: Reply with quote

I have not said I agree with the tax, I was merely pointing out the figure is 11% and not, as has been said on here, nearly 50%. Granted, employee/employer combined is, but that's a different argument.
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Cyberkada



Joined: 04 Dec 2011
Posts: 306
Location: Xi'an, China

PostPosted: Sun Jan 08, 2012 12:56 pm    Post subject: Reply with quote

steve b wrote:
I have not said I agree with the tax, I was merely pointing out the figure is 11% and not, as has been said on here, nearly 50%. Granted, employee/employer combined is, but that's a different argument.


The OFFICIAL RATE is roughly 11%. But I'm sure that schools will find a way to get back some of the 37% they have to pay - by cutting our pay/ benefits, for example...
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steve b



Joined: 31 May 2011
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PostPosted: Sun Jan 08, 2012 12:59 pm    Post subject: Reply with quote

As I stated, that's a different argument entirely.
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Cyberkada



Joined: 04 Dec 2011
Posts: 306
Location: Xi'an, China

PostPosted: Sun Jan 08, 2012 1:12 pm    Post subject: Reply with quote

steve b wrote:
As I stated, that's a different argument entirely.


I know... just expect it... No government has ever really turned down a tax.... plus it will be a big loss of face for the Party big-wigs that thought it up.
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