The U.S’s Taxation Vs China’s Taxation

The development of a country is inseparable from taxation, which is the guarantee of the country’s fiscal revenue. I believe for most countries the purpose of the taxation is to economic and social. As the world's largest economy, the United States has built the world's most advanced and most complex tax system. However, China experienced rapid economic development in the past century. I research China’s taxation from the viewpoint of business. I will compare between China and the U.S. about opening a factory and relocating some workforce.

For geographic, The U.S. located in North America; however, China located in Eastern Asia. Both countries are located in the northern hemisphere and are both countries with both land and sea. For climate, China has extremely diverse. The United States has almost all the climate types in the world, with few severe droughts occurring in major agricultural areas, flooding is not common, and temperatures are moderate and sufficient rainfall is available. There are many plains in the United States, and the area suitable for cultivation is larger than China. From the perspective of neighboring countries, China has many neighboring countries, but the north of the United States has only Canada and the south of the United States has Mexico. Thus, China has more advantages in geographical location.

For economic, China's coal, non-ferrous metals, rare earth, hydropower, and wind energy resources are abundant; the United States has abundant resources such as cultivated land and oil, and many mineral deposits have not been developed. In general, the US natural resources advantage is more obvious. The U.S. goods and services trade with China totaled an estimated $710.4 billion in 2017. Exports were $187.5 billion; imports were $522.9 billion. The U.S. goods and services trade deficit with China was $335.4 billion in 2017. (office of the United States Trade Representative). In China, most cities have bus service and subway system. In the U.S, only a few of the biggest cities have a metro system and they are not very extensive outside of NYC. Overall, China has high-quality or superior public transportation in cities, and public transportation in the United States in most towns (except New York City) is very poor.

For cultural or social, China’s literacy rate is 96.4%. According to THE World University Rankings, the advantages of American higher education are obvious, 17 of the top 20 universities are from the United States. There are 7 universities in China that are among the top 200 in the world. There are Peking University, Tsinghua University, Fudan University, University of Science and Technology of China, Nanjing University, Zhejiang University, Shanghai Jiao Tong University. Thus, China’s education level is not bad, but the united states better than China.

China implements one country, two systems. Hong Kong’s economic freedom score is 90.2, making its economy the freest in the 2018 Index. However, China's economic freedom score is 57.8, making its economy the 110th freest in the 2018 Index. Its overall score has increased by 0.4 points, with higher scores for government integrity and judicial effectiveness more than balancing declines in fiscal health, labor freedom, and property rights China is ranked 24th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages. (2018 Index of Economic Freedom )

Taxation policies: China has a long history of taxation, and taxation varied greatly over time. The initial land tax is the main source of revenue for premodern China. In the middle and late Tang Dynasty, due to the financial difficulties of the state, the Tang government adopted the minister’s suggestion and began to levy taxes on salt, tea, and alcohol. At the same time, it followed the predecessor system and continued to impose commercial taxes and duties. Since the founding of the People's Republic of China, China's tax system has basically established a dual-subsidiary tax compound tax system, that is, the turnover tax and income tax as the main tax, supplemented by the tax system of other taxes.

China relied the most on corporate tax and indirect tax. More than 90% of the tax revenue is collected by enterprises, including value-added tax, consumption tax, and corporate income tax. Contrary to the characteristics of China's tax structure, the US The federal tax structure is based on direct taxes and personal taxes. The United States relies heavily on the individual income tax, at 39.3 percent of total government tax revenue. (El-Sibaie) The threshold for filing income tax in the United States is very low, and even many poor people are required to file tax returns. In China, only residents with an annual income of more than 120,000 Yuan are eligible for tax returns. At present, China’s individual tax is mainly taxed separately according to individual salary. There is no Married Filing Jointly. I think that a very important difference is that the United States pays taxes considering to the burden, while China pays taxes according to income. in the united states., the tax rate, the threshold of taxed, and the deduction are all so that lighten the burden on taxpayers. Therefore, many items like children and family structure can be used as deductions. China pays taxes on income, regardless of the taxpayer's family structure and the actual burden. If there is income, it is strictly taxed according to the tax system. The standard rate of corporate Income Tax is 25%, but the tax rate for qualified companies (such as emerging/high-tech companies and certain integrated circuits production enterprises) in industries encouraged by the Chinese government can be reduced to 15%.

If I were the CEO of a company, I would not open a location in China. First reason, China’s economy is unfree. The trade war has worsened import and export trade. The second reason, from the perspective of total tax rate and tax amount, the burden of the tax burden on Chinese enterprises is significantly higher than that in the United States.

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