Chinese SOE employees face tax rise
American expats have long looked at their low-tax paying peers with envy. While Englishmen, Frenchmen and others in Hong Kong have enjoyed a 17% maximum tax rate, those born in the US are also forced to pay taxes in their country of birth, even if they’ve been absent for decades.
That has led some to renounce their US citizenship, giving up the right to vote and bear arms, for the right to spend a bit more in Lane Crawford. But most have paid their taxes through gritted teeth, driven by patriotism, a sense of justice or old-fashioned laziness.
Now, at least, they are not alone. The rising competition between China and the US has led to trade barriers, political squabbles and tit-for-tat policy moves. It has finally led to tax competition. Just who can get more out of those working abroad?
China decided this month that it was going to tax some of its citizens working overseas. That was not an altogether surprising move: Chinese citizens overseas should have been paying tax onshore for years. But previously, they were allowed to get away it. Not anymore.
The move to tax overseas residents may cover all Chinese citizens in the future, but at the moment only those employed by state-owned enterprises are going to be forced to cough up. That makes sense — these companies should have the data, and the willingness, to help China’s taxman figure out exactly what he is owed.
This does, however, call into question the decision of many capital market bankers to take jobs with China’s ambitious state-owned banks. These bankers have long regaled journalists with grand visions about how Chinese banks are set to take the world by storm.
Will they prove just as committed to the cause when they realise it’s going to lead to a significant rise in their tax bill? Watch this space.