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“Red” China Taxes Capital Relatively Lightly

By: William McBride

China, one of the fastest growing countries in the world, has a pro-growth taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. system. The OECD released a report this week on China’s tax system and how it compares to developed countries. Basically, China is a low tax country over-all and has particularly low taxes on capital. China has a corporate tax rate of 25 percent, compared to the U.S. rate of 39 percent. China has no capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. , a dividend tax of 5 to 10 percent, and no tax on interest earned in bank accounts.

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