China Enforces Overlooked Tax on the Ultra-Rich

The tug-of-war between Chinese policymakers and investors continues. Losses in Chinese stocks deepened Tuesday as skepticism grew over Beijing’s latest efforts. In yet another attempt to boost the sputtering economy, China will let local authorities issue as much as $853 billion in bonds through 2027 to defuse financial risks by replacing so-called hidden debt. All the while, Chinese banks are said to cut interest rates on $42.3 trillion of deposits as soon as this week, as the latest bouts of stimulus squeeze their profits. But to help replenish its coffers, Beijing is zeroing in on the ultra-rich.

The enforcement of a long-overlooked tax on overseas investment gains by wealthy Chinese is underscoring a sense of urgency within the government to expand sources of revenue, especially with land sales drying up and skyscrapers sitting half empty. In echoes of President Xi Jinping’s “common prosperity” campaign — a crackdown that has ensnared billionaire bankers to property tycoons — tax authorities in recent months are said to have been summoning wealthy individuals while others are being told to conduct self-assessments. Some of the people contacted had at least $10 million in offshore assets, and they may face levies of up to 20% on investment gains, plus possible penalties on overdue payments.