Global perspective Instead of avoiding income tax, as so many expatriates do in China, our reporter has tried to do the right thing - only to find the taxman evading him.
Being good has been a taxing endeavour
BEIJING // It is easy for expatriates, after several years in the UAE, to forget how lucky they are to be spared the attentions of the taxman. Each month, every dirham they earn is theirs to spend or save as they choose. How different I have found things to be since I moved to China four months ago to work as a correspondent for The National. The biggest headache when it comes to income tax has not, however, been saying goodbye to a share of my monthly pay packet. Instead, the actual paying of the money has caused me problems, and ones that are all the more annoying considering that income-tax collection rates are so low in China.
"China has very high tax rates but they are not collecting much tax. There's a problem with the system," said Andy Xie, a former economist for Morgan Stanley, at a talk in Beijing earlier this year. Indeed, I suspect that plenty of the other journalists here in China make little or no contribution to the Communist Party coffers. The first fellow journalist I met after I arrived, a European I chatted to briefly at the country's International Press Centre, did not seem to think it was incumbent upon me to be open with the Chinese authorities when it came to money.
"Just declare some of it and hope that keeps them happy," he said. Instead, keen as I am both to pay my dues and to avoid the worry of wondering whether I will be slapped with a mammoth tax bill when I leave China, I decided not to follow his advice. Whether most of the other journalists here do the same is at least open to question. Given this situation, I thought I would be welcomed with open arms when I arrived at the tax office in the Chinese capital to register myself and to declare every last yuan of my monthly salary.
Instead, along with the interpreter I had taken along with me, I was greeted with what could most kindly be described as indifference. A lot of people would have described the attitude and approach of the officials, who seemed more interested in the contents of their fish tank than in helping me with my tax affairs, in much more strongly negative terms. The tax system in China appears to be so labyrinthine that the only way to deal with it properly, I was told, was to hire an accountant to do my books for me.
Resistant to unnecessary spending as I am, I instead embarked on a month's-long process of sorting out my own tax affairs, plus tying up the loose ends left by my predecessor. Tying up those loose ends was easier said than done. The interpreter I hired to help out checked the tax office's website and described the process I had to go through as nothing less than "horrible". That was perhaps overdoing it slightly, but nonetheless it let me know that I was in for a long and difficult process, and one that is still unresolved.
I had to get copies of the other journalist's passport, his press card and the receipts for each occasion he had paid tax. Just getting hold of these entailed repeated telephone calls over several weeks. And then it turned out these were not enough. China's income-tax system allows exemptions for certain portions of income, including that which goes on rent, as individuals are expected to pay tax on this amount when they hand over their rent cheque.
So, to confirm that the tax figure paid by my predecessor was correct, the authorities asked me to find out how much rent he was paying and to confirm this with receipts. It took several visits to the tax office just to reach this position, something that was as frustrating as it was wasteful in terms of time. It was at this stage, having decided I had annoyed the other journalist's wife enough with my repeated requests, I decided to put an end, at least temporarily, to my efforts to tie up these loose tax ends.
Instead, for the moment at least, I am licking my bureaucratic wounds and focusing my efforts on ensuring my monthly tax bill is paid properly. This is enough of a headache. It means going to the bank, checking exactly what my salary (in dollars) converts to that day, then going to the tax office, playing about on some computers to get a special tax number, before heading to a bank to actually pay the money, which works out to about 16 per cent of my income.
Making this payment usually entails a long wait, the staff proving, for all the ways that China has shaken off its communist past, in terms of customer service it clings to it tenaciously. So paying my tax takes up almost half a day every month. But I am careful to try to do things exactly as they should be done because I realise how problematic mistakes could be. If I overpay tax slightly, I have to fill in a series of forms and apply for a refund. If I underpay, I could cause problems for myself or whoever else The National employs in China. I am ever aware that I am only a small miscalculation away from landing myself in difficulties.
For all the minute attention to detail the tax office insists on, it comes as countless other expatriates flout the rules spectacularly, paying pitiful amounts of tax by declaring only income from one source, or staying in the country on business instead of journalist visas, and paying not a single penny in tax. Although I never will, it sometimes makes me wonder why I do not join them as a tax outlaw - because playing by the book gives little peace of mind and no escape from a bureaucratic nightmare.