By Li Hong, People's Daily Online
The latest revelation by Central Government's State Development and Reform Commission that it is considering new taxations on excavating nature's resources and urbanities' homes sent China's stocks into a tailspin. Investors fled companies of coal, metals and oil in droves. Shares of real estate developers and electric appliances, tumbled.
It is clueless if not preposterous for the most powerful cabinet department under the State Council to come out with the short-sighted plan. As governments all over the world reduce taxes on companies and households to inspire spending and mitigate an annoying slowdown, China's bucking-trend move, seemingly full of guts, is expected to depress domestic consumption, and doom a nascent recovery.
Chinese critics have mocked at the plan, representing similarity to taking out eggs by slaughtering the hen. One online chat-room message asserts the plan, which has been approved by the cabinet, means that the government will legitimately "usurp" part of the hard-earned wages, and make our already difficult lives even harder.
The policy-makers at the Commission might be worried about a depleting State coffers, because of less proceeds from troubling businesses nationwide, and increasing deficits spending, including an unprecedented US$586 billion stimulus plan the government meted out at the end of last year. However, raising new taxes will only force the businesses to the wall.
Market watchers say that the new estate tax, if levied on urban homeowners, will effectively sputter China's housing market, which has shown some glimmers of "green shoot" in big cities like Beijing and Shanghai, after a year-long sales lull. And, additional taxation burdens on the shoulders of the homeowners will lead the consumers to snap shut wallets, dampening the consumption market.
Maybe those policy-makers at the Commission forget a fact that as many as 46 percent of urban houses have been bought by young people with mortgages. New estate tax will make those people, who call themselves "house slaves" (paying mortgages back to banks for as long as 30 years), financially jittery, if not jumping from the windows.
As the world is struggling in a recession whose severity is never seen in decades, Beijing's economic decisions could also affect other countries fare in the downturn. As other industrial economies contract, China is actually in a position to pick up some of the slack, say, buying more from the rest of the world.
The taxation plan made public by the Commission will definitely stand in the way of encouraging Chinese urbanities to spend more. On the contrary, it will propel us to save more for a rainy day.
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