Chinese Online Class - Taxing the monopolies

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Opinion / Commentary

Taxing the monopolies

(China Daily)
Updated: 2007-09-19 07:22

The dividends paid by State-owned enterprises (SOEs) should be used to
improve public welfare, says an article in Heilongjiang Morning Post. The
following is an excerpt:

According to a document on the setting up of a State asset operation
budget issued by the State Council last week, China's SOEs are to start
paying dividends to the government in 2008. It means an end to a 13-year
period where SOEs paid no after-tax profits to the government.

Dividends are to be paid based on operating income and proceeds from
stock sales and asset transactions. The dividends will be spent on
restructuring and reforming SOEs, and bolstering social security funds.

In 2006, the SOEs realized a total profit of 1.1 trillion yuan ($145
billion) and profits of central SOEs totalled 755 billion yuan. The
no-dividends policy is no longer appropriate.

Fan Gang, a member of the central bank's Monetary Policy Committee,
recently said that the country's high savings are mainly from enterprises
instead of individual citizens. We should let the whole society share the
high profits of SOEs through taxation and dividends.

The no-dividends policy also leads to investment expansion, which affects
the government's macro policy to curb overheated investments. It is also
the root cause for the high wage level of monopoly industries.

It is basic logic that those who invest enjoy the benefits. Since the
public owns the SOEs, they should be the ultimate beneficiaries. To spend
part of the profits on public causes will go a long way toward upgrading
the nation's welfare level.

To guarantee the effects of the new policy, several things should be
watched at the operational level. As most of the profits are made by
monopoly enterprises, we should avoid their transferring the pressure of
dividends onto the public. The budget should also be more scientific and
more supervision should be given to its implementation to guarantee the
proper use of public money.

(China Daily 09/19/2007 page10)

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