Is a wealth tax Xi’s answer to fill China’s empty coffers?

AFTER October’s congress of the Chinese Communist Party, speculation has been rampant that China will soon tax its rich. Different options have been floated by mainland academics and lawyers, such as an inheritance tax, a wealth tax, or even an exit tax should high-net-worth individuals renounce their citizenship — a system that is not dissimilar to what the United States has.

President Xi Jinping’s opening speech at the twice-a-decade party congress got on the nerves of the rich. He vowed to ensure a “well regulated” system of wealth accumulation. “We will protect lawful income, adjust excessive income, and prohibit illicit income,” said Xi. As such, many fear that the president may impose various taxes on the wealthy in the pursuit of “common prosperity,” his signature drive to broaden the middle class and narrow the wealth gap.

But equally important, as Chinese billionaires look around, they see that Covid Zero and a harsh real estate crackdown have emptied the government’s fiscal coffers. Beijing will have to find alternative sources of income, and common prosperity might just be a convenient slogan to fill an increasingly urgent need.