Tax a matter to scratch our heads
By Liu Shinan (China Daily)Updated: 2007-03-28 09:48
The authorities decided last Friday to tax prizes from scratch-and-win receipts if the prize exceeds 800 yuan ($100).
The decision is bewildering. I cannot figure out any
sensible reason for the move. If it is meant to increase the State's revenue,
how significant will the increment be? The rate of winning the scratch-and-win
prize printed on commercial receipts is extremely low and the size of the prize
is usually small. These days, there are often reports of people winning millions
of yuan in the Sports Lottery or Welfare Lottery but there seems to have been
few cases of anybody winning large sums of money in the receipt prize.
The authorities seem to have forgotten the original purpose in initiating the prize. About 10 years ago the State Administration of Taxation decided to attach prizes to receipts to encourage consumers to request receipts after shopping or consuming other service products. The move was meant to prevent enterprises from evading taxes.
The Chinese public was not in the habit of asking for receipts for petty goods or services unless the purchase was made for their work units, which required the invoice. This is especially typical in restaurants. People who ask for receipts are those who devour delicious food on public money; people who eat on their own never bother about receipts.
Eateries are believed to be the largest sector in China's service industry. One does not need any authoritative statistics to know that running restaurants is highly lucrative. Just look at the hordes of cars parked outside restaurants along nearly all streets every night and the crowds of gourmands behind the brightly lit windows.
Restaurants are a major source of cash. But restaurant owners try to minimize exposure of their income by not giving receipts. And customers generally do not request receipts.
Even after the government initiated the lottery-style prize to encourage
consumers to ask for receipts, many people still showed little interest in
scratching the covered prize codes. Now that the authorities have decided to tax
the prize, it is predictable that even fewer people will request invoices. 
I wonder whether the tax authorities have compared the gains from the new tax on the receipt prize with the possible loss of revenue caused by weakened monitoring of corporate income.
They seem to have forgotten a well-known Chinese proverb: "Jianle zhima diule xigua", meaning picking up a sesame seed but overlooking the watermelon, or being penny wise but pound foolish.
Chinese business people are much wiser than the tax people on the relationship between a sesame and a watermelon.
Go to the electronics markets in Zhongguancun, Beijing, and you will see how shrewd the merchants are in this regard. Ask sales people for a digital camera or an MP3 player, and they will ask you if you want a receipt. If you don't, you will be offered a handsome discount.
And don't worry about the after-sale service if you lack a receipt. Merchants will give you all their company's information with an unofficial receipt warranted by the market operator. The merchants go to all this trouble for only one purpose: to avoid issuing an official receipt printed by the State taxation authorities.
The authorities need to learn from the shrewd merchants.
Email: liushinan@chinadaily.com.cn
(China Daily 03/28/2007 page10)
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