Like any modern nation, China has to collect taxes from everyone. In particular, there seems to be a VAT tax (kind of like a sales tax) on all retail and commercial purchases. For all of its might and power, the central government in China knows that it, in the end, really donesn't have that much power over people's daily lives. Simple laws stating that you must pay your sales tax fall on deaf ears in a cash-based economy. There's simply no reason to pay if you are paid in cash, pay all of your bills in cash and your reports to the tax authority can't be fact-checked. What to do?
Well, the government tried telling people they had to do it (had about as much effect as it does in Europe). From what I can see, the government signs and slogans about this issue now range from appeals to patriotism ("It's your duty to pay taxes") to outright begging. The next step turned out to be ... bribery and coercion. I'm not sure of the order of things, but here's what's going on.
1) There is a special type of receipt call a Fa Piao. It's an official receipt that indicates all taxes on the amount of money on the receipt have already been paid. Some larger businesses have special printers and paper that create custom receipts with your purchase amount but most businesses have pre-bought papers of varying amounts (1,5,20,50, and 100 yuan). They buy these in bulk from the tax authority for the cost of the tax on that amount of money. For the government, the advantage is that taxes (when they are paid) are now pre-paid. Businesses pay taxes up front to cover the requests by their customers for official receipts.
2) All businesses were told that they couldn't deduct business expenses from their income unless they had a Fa Piao to back it up. Neat, tidy and a great way to coopt the entire business community (myself included) into asking for official Fa Piao's when they have business expenses.
3) To mop up the rest of the population, the government added a "lottery" to each of the Fa Piao's. Each Fa Piao has now become a scratch-off card. :) In the corner of each Fa Piao is a small, silvered rectangular box. When scratched, most of them say "Thanks" but every once in a while, you might win some money (e.g. a few yuan all the way up to 500 yuan). In all my time in Beijing, I've seen one person win one time (20 yuan). I've met one person who says they won 500 yuan.
The upshot is that many people now ask for Fa Piao's just for a free chance to win some money. This annoys the owners to no end since they are actually "losing" money each time a Fa Piao is given out. I don't feel all that sympathetic, though. People should pay their taxes. I've also met quite a few local chinese who feel that it is their duty to ask for a Fa Piao every time they spend money. They are genuinely offended that someone wouldn't pay their taxes (since most of the people I know are professionals who have taxes automatically taken out of their paychecks). Asking for a Fa Piao gives them a quick, painless way to make sure that everyone else out there is also paying their taxes.
Labels: economy