Calls for the introduction of inheritance and gift taxes in China have been publicly raised by former high-ranking officials. Amid growing concerns about the sustainability of pension finances due to rapid aging, there is a push to strengthen taxation on the wealthy to secure funding for pensions.
Guo Shuqing, who has served as the Secretary of the People's Bank of China and Chairman of the China Banking and Insurance Regulatory Commission, proposed in a paper published in September in the academic journal Social Security Review that legislation for inheritance and gift taxes should be expedited. This paper has recently gained attention as it has been featured in various Chinese media outlets. Guo currently serves as a member of the Standing Committee of the National People's Congress and as the deputy director of the Financial and Economic Committee.
In his paper, Guo cited forecasts from several research institutions indicating that China's basic pension insurance for workers is expected to face a financial deficit within the next 20 years, with expenditures surpassing revenues. The analysis suggests that as aging progresses, the scale of financial shortfalls in pension funds will continue to expand.
He specifically pointed out that the average monthly pension for urban and rural elderly residents is only about 260 yuan (approximately $40), which is insufficient to meet basic living needs. Guo emphasized that farmers have historically contributed to China's economic development and wealth accumulation through mechanisms such as agricultural taxes, mandatory labor, and the price gap between industry and agriculture. Considering their historical contributions, he argued that there is a need to significantly increase the basic pension for farmers, although this could lead to new financial burdens.
Guo asserted that to ensure the sustainability of pension finances, new sources of tax revenue must be established. He emphasized the need to strengthen the principle of taxation based on the ability to pay during income tax collection, ensuring that higher earners contribute more. He also highlighted issues related to tax evasion among some business owners, noting instances where individuals receive little or no salary to avoid personal income tax. He stated that practices allowing household expenses to be treated as business costs should not be permitted.
One of the most notable proposals is the introduction of inheritance and gift taxes. Guo suggested that legislation for these taxes should be expedited while also reforming other taxes, such as consumption taxes. He noted that these tax increases would primarily affect a small number of high-income individuals and that a portion or all of the additional tax revenue could be designated for basic pension insurance subsidies.
Guo also proposed utilizing state-owned capital, stating that the net assets of China's state-owned enterprises amount to approximately 140 trillion yuan. He explained that transferring shares of state-owned enterprises to social security funds could strengthen the long-term funding system for pensions. However, he emphasized that the level of social security should align with the level of economic development, warning against falling into populist welfare expansion, citing examples of countries that have faced debt crises due to excessive welfare spending.
* This article has been translated by AI.
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