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2011/10/30 / Horace

After riot is pacified, calls for tax reforms.

The riot in Zhejiang caused by tax increases has sparked a national call for tax reform.

The riot began on Oct. 26th after a children’s clothing store owner in the town of Zhili in Wuxing District in Huzhou City refused to make tax payments to local officials and then mustered other shop keepers to rally in support, Shanghai Daily reports.

Around 600 people took to the street and blocked a major highway.

“As they tried to smash a passing Audi sedan”, the frightened driver hit 10 with 2 of them in critical conditions as he attempted to flee, says  China Radio International. At night, people gathered at the town hall, “vandalized public properties” and injured several policemen and urban management officers.

Radio Free Asia quotes local residents, saying 40 vehicles were smashed on Wednesday alone and another 100 were smashed on Thursday.

No one died in the incident with the wounded in good care, according to Huzhou Online, a government-run portal delivering local news and information.  Local police have launched a crackdown on criminals with “quite a few” having criminal records and that the police have held 21 under criminal detention.

Local media says the situation has now been calmed and most business has returned to normal, while police are having an “all-around patrol” and propaganda materials are being distributed.

Tax burden

Small enterprises in China are having a difficult time this year due to more restrictions on bank loans and the current global economic turmoil. Many entrepreneurs have gone bankrupt or suddenly abandoned their factories and fleed in order to escape debts.

Zhili, where the riot took place, is the biggest manufacturing base of children’s wear in China. Self-employed migrant workers rent houses and make clothes to make a living. The  government taxes sewing machines in the town and decided to double the charge this year from 300 yuan (48 USD) per machine to 600 yuan.

It was a business owner’s rejection of this tax that sparked the riot.

Now, the “sewing-machine tax” has been suspended.

Media reflection

Most media reports in China on the incident are simply or similar to government news releases. However, there are comments on the incident urging tax reforms.

China’s government revenue has been growing much faster than GDP for years. The tax revenue in the first 9 months of this year has witnessed a growth of 27.4% year-on-year, while Peking University estimates this year’s GDP growth to be lower than 9%.

In an editorial, China Business says the increase in taxation should be controlled and shouldn’t make people feel that the government is extracting benefits from the people.

Southern Metropolitan Daily recalled a popular protest by Zhejiang clothes makers in ancient Ming Dynasty and concluded that it was the unreasonable taxation policy that bankrupt employers and made workers jobless, which finally led to the protest.

Meanwhile, a commentary on Hexun.com, a portal mainly focused on financial news, says the tax increase is quite bearable compared to the profits of these workshops. The commentary further notes that workshops in Zhili, where the riot broke out, still enjoy a much lower tax than their urban counterparts even after the increase.

Wang Yahuang, the author, says the riot broke out because the government increased the tax unilaterally without any negotiations. He says there should be a mechanism to fully express voices of different interest groups and that taxation should be settled by both sides instead of by the government itself.

Even before the riot broke out, the central government had promised to reduce double-taxation of certain transportation in China, a move expected to encourage some business activity and amounts to a philosophical change. Yet, there might be a long way for Chinese citizens to share more of the country’s prosperity.

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2 Comments

Leave a Comment
  1. Argus / Oct 31 2011 07:23

    From here (New Zealand) I applaud the ‘revolt’ but see no need to attack the innocent passers by. That a man is rich doesn’t necessarily make him a thief or immoral profiteer.

    Governments everywhere must be made to realise that most people will accept being kept as milking cows, or sheep—but sheep should be shorn for their wool, not skinned alive.

    • Horace / Oct 31 2011 12:02

      Thanks a lot for viewing my post. You might come here often to see more of my posts on China.

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