China is going to start enforcing a widely ignored law on its book requiring that citizens pay taxes on income earned abroad as well as at home. This brings them in line with the U.S. on the issue. The New York Times reports:
The Beijing billionaires who set up cryptically named companies in the British Virgin Islands to hold their fortunes are in the cross hairs. So are the Guangdong salesmen living and working in Africa and Latin America. China’s tax officials are now demanding that citizens start reporting exactly how much money they earn overseas. […]
“The newest element is the Chinese tax authorities’ deciding to more strictly enforce this worldwide taxation, which has always been required of Chinese individuals,” said Edmund Yang, a PricewaterhouseCoopers partner in Beijing for international assignments. “The level of compliance among Chinese nationals overseas has been relatively low.”
As Walter Russell Mead wrote in his most recent essay on the strategy behind Xi’s purge, “the message has gone out to the rich and the powerful that the state has the power and the legitimacy to step in and take them down whenever it wishes. Private property in China exists at the whim of the state and, especially, at the whim of the leader of the state.”
Until now, that wasn’t true for China’s elite who had the means and inclination to take their money abroad. But the new policy will seal the cracks that rich and powerful Chinese could slip through to avoid the purge. They either have to declare their property and risk having it confiscated by the state, or not declare their property, and risk having it confiscated by the state.