China should raise taxes on the income and properties of high-income groups, a prominent economist has said, arguing the move would align government incentives with protecting property rights and reducing broader social inequality.
Liu Shijin, a former deputy head at the Development Research Centre of the State Council, argued that China’s fiscal system should shift from its reliance on indirect taxes – levied on the circulation of goods and services – to direct taxes imposed on individual wealth.
“Once properties become a stable tax source, local governments will be more serious and sincere in protecting your property,” he said.
Liu – who also served as a member of the Chinese central bank’s monetary policy committee from 2018 to 2024 – was addressing concerns that raising taxes on high-income groups might undermine property rights or destabilise investor expectations.
But experience has shown that government conduct is closely related to its revenue sources, he added, suggesting that a state funded through wealth taxes would be incentivised to ensure the security of those assets.
Liu’s comments, made at a Beijing forum organised by the China Europe International Business School on Friday, came at a time when authorities are facing significant fiscal pressure.