Opinion | Tax changes should be enacted by law, through China's legislature
Hu Shuli says a 30-year law allowing the Chinese administration to bypass the legislature in making important economic decisions must be changed
On January 13, the consumption tax on petrol and related products was raised from 1.40 yuan (HK$1.80) per litre to 1.52 yuan, while that on diesel and jet fuel increased from 1.10 yuan to 1.20 yuan. This was the third time in two months China has raised the consumption tax on oil products - the most aggressive action taken since tax reform started in 2009.
Every tax adjustment so far has ignited a flurry of debate. Many people are worried about the tax burden, and also raise questions about how the tax revenues will be used. These are valid concerns. But we should also question the legality of how tax matters are decided.
Indeed, the controversy over tax increases underlines the importance of hastening efforts to regulate taxation. Changes to the tax rate must be enacted by law, under the purview of the National People's Congress.
Yet, as things stand, the flaws of the current system cannot be ignored. Take the recent tax rises. In the last three rounds of adjustments, an announcement was jointly made by the Ministry of Finance and the State Administration of Taxation. Each time, spokespeople from both agencies addressed questions about the reasons for the raise and how the additional revenues will be used, behaving as if they were at a press briefing. Yet, none of them have bothered to address questions about the legality of the tax increase.
Some experts said the two departments acted according to law, and the tax rises were above board. They cited the second article of the "Provisional Regulations on Consumption Tax", which said: "Any adjustments to the consumption-tax taxable items and tax rates shall be determined by the State Council."
As this rule points out, the State Council has been vested with the power to decide on the tax amount.
Moreover, article 10 of the Law on Legislation says: "The decision of such an authorisation shall define the purpose and scope of authorisation. The organ being authorised shall exercise the authority strictly according to the purpose and scope of authorisation. The organ being authorised may not transfer the authority to any other organ."