Fiscal Fudging — Tax, Balancing the Government Books and Paying for Social Harmony

Abstract

One problem China’s government has extracting tax from the layers of government and both domestic and foreign businesses is that China’s tax laws are as new to everyone operating under them in China. This is also true of the legal system, where companies need be cautious lest they fall foul of unexpected turns of legal interpretation. Tax is a complicated issue in any country, not least one as large and fast-growing as China. The room for tax-dodging manoeuvres is wide, and many have found ways to do so, putting the public cof ers at a disadvantage. Policing new tax laws can be difficult to implement, both because of the newness of the laws and due to the layers of local government that are open to corruption.