The Corner

The Reagan Revolution Spreads!

From today’s Wall Street Journal (sub required):

China Sets Tax Plan to Aid Growth

BEIJING — In a major new policy that a senior Beijing official says resembles “Reaganomics,” China is preparing to stimulate investment in its economy by reducing taxes for domestic companies and by simplifying the tax code.

The plan, however, would also lead to a de facto increase in the taxes that foreign-invested companies pay, because much of the preferential tax treatment they enjoy would be abolished. By the time the plan is fully implemented in two years or so — contingent on approval by Chinese lawmakers — the new tax rate for all foreign and domestic companies will be “in the range of 24% to 28%,” Deputy Finance Minister Lou Jiwei, a plan architect, said in an interview Thursday.

“Our major purpose is to standardize the system and block loopholes,” Mr. Lou said. But the lower taxes for Chinese companies, accompanied by what he said would be a gradual shift away from using government spending to fuel growth, also underscore how much fiscal policy has evolved in a country that is nominally ruled by communists.

“It’s a lot like Reaganomics,” Mr. Lou said. “We feel that only through simplifying things and lowering tax rates will revenue collection become more efficient. At the same time, we also want to give fuller play to companies,” rather than the government, when it comes to investment in the economy, Mr. Lou said….

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