China's "moon cake tax" too much to stomach

Wed Aug 31, 2011 2:31pm EDT
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BEIJING (Reuters) - A Chinese tax on moon cakes is not likely to spark an uprising of the sort that earned the Boston Tea Party its place in history, but the move has left a bad taste in the mouth ahead of the Mid-Autumn Festival.

Tens of millions of brightly decorated boxes of the fist-sized moon cakes are exchanged at this time of year in a symbolic tribute to the full moon that is considered biggest and roundest on the holiday, which this year falls on September 12.

Companies get into the act, and gifts between colleagues and customers have become a costly business ritual across the country.

That made the so-called "moon cake tax" an easy choice for tax authorities looking for new sources of revenue. Actually, the tax is not new, but the moon cakes given out by companies are now considered to be "income" that is taxable, according to a new regulatory interpretation, setting off a torrent of criticism.


"The Mid-Autumn Festival is a traditional time for family reunions in China. The company is just being solicitous to the employees, and even that is being targeted by the tax department," a manager at a small state-owned company in Guangzhou told Reuters. "It hurts people's feelings."

Others said the ruling added insult to injury because it fell disproportionately on average workers.

"If the welfare of officials, such as the government cars, were all taxed, people would not have been upset about the moon cake tax," said Xie Wen in comments on a Twitter-like service called Weibo.

China's taxpayers are increasingly sensitive to tax hikes as stubbornly high inflation erodes real purchasing power. For the first seven months of the year, fiscal revenues rose 30.5 percent from a year earlier to 6.67 trillion yuan ($1.05 trillion), and the growth rate was much higher than that of per capita income.

Another online comment on urged the taxman to show a softer heart: "... when it comes to people's feelings and a happy festival, the government needs to consider more than legal taxing... State revenue has increased faster than people's salaries this year, so it would be a way to show the authorities' concern for the people by cutting a little tax before the Mid-Autumn Festival."

(Reporting by the Beijing Newsroom, additional reporting by Zhou Xin; Writing by Ken Wills)

<p>An employee works at a workshop in a mooncake processing factory in Wuhan, in central China's Hubei province September 4, 2007. REUTERS/Stringer</p>