New crackdown on online streamers?
CCTV News reported today two cases of tax evasion by two Chinese online streamers, who were respectively fined 65 & 27 mil RMB.
The cases are interesting for 3 reasons:
1. They were caught by the tax authorities using "tax big data analysis" by the Hangzhou tax bureau. I guess that's one reason why big data is getting so important in China.
2. Their alleged wrongdoings were converting what they earned in the streaming business from personal income to the business income of the sole proprietorship. I'm not a tax expert, but if I remember correctly this is a widespread practice among China's celebrities and
is more of a grey area rather than outright illegal.
Interestingly, when in 2000 China decided to suspend corporate income tax on sole proprietorships and partnerships, and only levy individual income tax on their investors’ business income, it was hailed as a big benefit
for entrepreneurs to encourage individual investment, fair taxation, improve the income tax system, and create favorable conditions for the development of the enterprises.
But that policy was made at a time when the corporate tax rate was higher than the individual tax rate.
When the corporate tax rate was reduced in 2008, high-income individuals discovered that they can save a lot by shifting the income to sole proprietorships, as the higher brackets of personal income taxes are much higher than the corporate tax rate.
3. The two were fined 100% of the tax they evaded, even though they cooperated with the tax authorities and paid part of the tax before the investigation was concluded.
So what's the takeaway from all these? 1. Expect more tax crackdowns coming in China as the state tries to fill its coffers amidst an economic downturn; 2. Confucius is proven right once again: "In this world, nothing is certain except death and taxes".
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Ban on forced transfer of source code is one of the key obligations in the CPTPP. It has long been regarded as one of the main obstacles for China’s accession, with many claiming that China would never accept the obligation.
But this changed today with a State Council document.
In this document called “Notice of several measures to promote institutional opening-up in free trade pilot zones and pilot free trade port in line with the international high standards”, the State Council states that the relevant authorities shall not
“require the transfer of, or access to, source code of software owned by a person of another Party, as a condition for the import, distribution, sale or use of such software, or of products containing such software”, which is language copied verbatim from the CPTPP.
China adopted its first Foreign Relations Law yesterday.
Why the law now & what are the implications for foreign businesses? I explained in this @SCMPNews story.
‘Rule of law’: China adopts new legislation to help combat foreign sanctions via @scmpnewssc.mp/kiqq?utm_sourc…
In addition to my quotes along with @georgemagnus1 below in the story, I'd like to point to the following features of the law which will make it harder for businesses, both Chinese and foreign, to operate:
@georgemagnus1 1. Art. 5 emphasizes the central unified leadership of the CCP, which adds further to the uncertainty of the business environment as the Party could take actions based on political rather than legal considerations.
Key changes in the State Council Working Rules: 1. The guiding thoughts section deleted all previous references to Marxism, Leninism, Mao, Deng, Three Represent, & Scientific Development Outlook, and keeps only XJP Thoughts on Socialism with Chinese Characteristics in the New Era
2. All major decisions and problems MUST be reported to the CCP Central Committee first.
3. All State Council members shall resolutely implement the decisions of the Party Central Committee, and refrain from speech and behavior that contradicts the decisions of the CCP Central Committee.
Xi's speech at the Central Economic Works conference in Dec is published today.
Titled "Several Major Issues in Current Economic Work", it puts the first issue as expanding domestic consumption, i.e., "Prioritize the recovery and expansion of consumption...
It is necessary to ... innovate consumption scenarios, and fully release consumption potential. It is necessary to increase the consumption capacity of low- and middle-income residents who have a high propensity to consume but are greatly affected by the epidemic."
New Chinese TV drama #三体电视剧 (Three Body) is interesting to watch, not only because it is based on a @HugoAwards-winning novel, but because it helps to understand China’s highly-confrontational wolf warrior diplomacy which kept emphasizing "struggle".
As stated in the first episode by a Chinese general, the fact that we humans have survived from the Neolithic age until today without major catastrophes is a pure coincidence.
Similarly, the Chinese leadership believes that the peaceful period since 1978 is a pure coincidence.
Now the period is over, which is why Xi has been emphasizing that the world is not peaceful at all, as he stated in his video call with @POTUS last year.
Three Body is full of metaphors with striking resemblances to China’s history since the mid-1970s: