Cash-strapped China targets offshore wealth with new tax

Beijing, China is targeting offshore wealth held by the nation's affluent millionaires and billionaires, proposing new taxes to address a growing fiscal deficit. The deadline for these taxes, announced in July, is Thursday, providing a 90-day transition period for individuals to settle their obligations. Analysts report that the Chinese wealthiest are scrambling to address their financial affairs in response to the new levies.

This comes as local governments face cash shortages due to the prolonged property crisis. President Xi Jinping has emphasized the need to rectify past issues, including corruption and wealth inequality, but China's offshore wealth is estimated at hundreds of billions, a resource Beijing is eager to utilize. Economic challenges are expected to compel Beijing to intensify taxation on the wealthy, with personal income tax emerging as a key revenue source.

Hong Kong has become a significant hub for cross-border capital, with US$2.9 trillion in assets under management, driven by mainland China and a thriving stock market. The new measures have raised questions about the extent of assets subject to the tax. Individuals acquiring foreign nationality or residency, while still economically tied to China, may be subject to the rules.

This new tax policy, alongside other recent measures, aims to keep talent and capital within China, supporting technological innovation and economic growth.