China to tax foreign workers

China is in talks with other governments over a new law requiring working foreigners pay social security taxes, a deputy minister said today.

Hu Xiaoyi, deputy labour minister, said progress on implementing the tax was going smoothly despite uncertainly about what benefits foreign workers might receive and a backlash from firms nervous about increasing costs.

"Our ministry and different parts of the country are proactively and reliably pushing forward with the detailed work for this project," Mr Hu said on the sidelines of China's annual meeting of parliament.

At least a dozen countries have held talks with China about signing bilateral social security agreements, he added, which should mean employees who pay contributions in their home countries do not have to do so again in China.

China announced in July that foreign workers would have to contribute to its social security system, effectively a salary tax with individuals paying 10 per cent and employers about 30 per cent on the first 12,603 yuan (€1,520) of monthly pay.

The payments cover medical and unemployment insurance and pensions. However, the mechanism for tapping benefits is unclear, especially as foreigners that lose work visas must leave the country.

China's existing social security net offers very meagre protection for its own citizens, especially compared with some of the more generous European plans.

Hong Kong media has reported that the commercial capital Shanghai may delay implementation.

Reuters