Depends on your perspective. It’s great for productivity and overtaking the West, but the entire neijuan (involution, or extreme competition) is already happening at a pace that cannot be easily stopped, even with the government initiative promising to do so.
Think about this: the major tax base of both central and local governments are value-added tax, followed by corporate income tax. Besides, nearly 1/3 of local government revenue comes from land premium. As the property market is imploding, the reliance on the industrial/manufacturing sector becomes even more critical for the local governments, and that means the industries have to work harder to churn out more value-added goods and services to add to the local government tax revenues, without which it could not finance its operating expenditures (the city has to run the subways, rails, various infrastructure and public utilities, and paying the civil servants etc.)
While there may be an intention to stop the extreme competition from happening, there is no incentive for the government to actually do so. You don’t want to be the first one to lose out among your peers, and so it becomes a race to the bottom. The entire system needs to be revamped.
This all sounds terrible?
Depends on your perspective. It’s great for productivity and overtaking the West, but the entire neijuan (involution, or extreme competition) is already happening at a pace that cannot be easily stopped, even with the government initiative promising to do so.
Think about this: the major tax base of both central and local governments are value-added tax, followed by corporate income tax. Besides, nearly 1/3 of local government revenue comes from land premium. As the property market is imploding, the reliance on the industrial/manufacturing sector becomes even more critical for the local governments, and that means the industries have to work harder to churn out more value-added goods and services to add to the local government tax revenues, without which it could not finance its operating expenditures (the city has to run the subways, rails, various infrastructure and public utilities, and paying the civil servants etc.)
While there may be an intention to stop the extreme competition from happening, there is no incentive for the government to actually do so. You don’t want to be the first one to lose out among your peers, and so it becomes a race to the bottom. The entire system needs to be revamped.
So is there very little (or no?) income tax?
Only ～5% of the population (～70 million people, or ~9% of total workforce) have to pay personal income tax, because most people don’t even reach the minimum income needed (5000 yuan/month, or ~$700 USD/month) to qualify for income tax payment. The wealth disparity is huge.