Lin Min

    EVERYONE in China is feeling the pinch of inflation. Recently I found the price of steamed bun had been raised from 0.8 yuan to 1 yuan — this seemed reasonable given the increased costs of flour, energy and labor.

    Yet, I ultimately realized that the cost for my small breakfast had surged a whopping 87.5 percent from 1.6 yuan to 3 yuan. Previously two buns were enough for my breakfast but now I have to make do with three — not because my appetite had grown with food prices but because the size of the buns diminished the moment the price was raised.

    Buns account for a tiny part of our daily expenses. But with the trickle-down effects of inflation, the rising prices of our daily necessities keep reminding us we are helplessly, painfully in an era of inflation.

    To help bring runaway prices under control, the central bank has been tightening the money supply, with the Central Government adopting a string of unprecedented administrative measures to curb rising prices.

    But, there is another weapon lying unused in the government’s arsenal of anti-inflation policies.

    Pan Yaoming, a political adviser in Shandong Province, earlier this month tabled a proposal to reduce the value-added tax on steamed buns, which stands at 17 percent. Although Chinese consumers have been paying the tax for more than two decades, many were surprised by the rate because few were aware of it, thanks to the reluctance of tax authorities to provide receipts. Pan suggested the rate should be lowered to 13 percent, which is applicable to flour and dried noodles. His proposal has garnered much public support given that soaring food prices are making life for the working class more miserable in the wake of a housing market mania.

    Lin Boqiang, an energy economist, is poised to fuel the call for tax cuts after he revealed that Chinese gasoline prices are higher than in the United States and the gap has been expanding, thanks to a hefty fuel tax in China.

    With the prices of international crude oil expected to remain high, Lin called for the reduction of the fuel tax to relieve inflationary pressures.

    China’s taxmen apparently don’t regard the country’s taxes as too high. A Forbes survey, however, showed otherwise. According to the Forbes Tax Misery Index 2009, China levied the second-highest taxes in the world, just after France. The index may not be accurate in measuring the actual tax burdens in different countries because it did not include property tax and different countries have different tax structures. Yet it still offered some indication of China’s tax levels compared with other countries.

    Opponents of tax cuts may argue that China needs huge budgets to improve health care and social security. But they should look at the spending by oversized government agencies, which is usually publicly unaccountable. Slashing unnecessary public works, such as the unlicensed, multimillion yuan pavilion work in the Futian Mangrove Reserve in Shenzhen, would save much needed money for medical care reform and the country’s cash-strapped pension accounts.

    Some lawmakers are also renewing calls to raise the threshold of personal income tax despite repeated failure in recent years to relieve the tax burden for salary earners.

    It would be a mammoth task to review the country’s taxes and duties, and any tax cut would be a painful decision for fiscal authorities. Beijing University economist Zhou Qiren aptly said that proposals to raise taxes tended to be accepted much more readily than any proposal to cut taxes.

    Fiscal authorities should be called to notice the fact that China’s tax revenue has fast outpaced economic growth in recent years. After surging an annual 22 percent on average between 2003 and 2007, revenue growth reached 19.5 percent in 2008 and 11.7 percent in 2009 despite the global economic meltdown. It regained momentum last year, surging 22.5 percent.

    The notion of China being a wealthy State with poor people may have been overstated. However, such an explosive growth in taxes is definitely unsustainable.

    Reducing the tax rate for steamed buns and other daily necessities would be an easy step to begin with. Any relief will help grass-roots citizens at a time when inflation continues to bite.

    (The author is editor of the Shenzhen Daily News Desk.)