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HongKong> Opinion> Content
Friday, September 21, 2018, 12:40
Stability key to social insurance premium policy
By Zheng Bingwen
Friday, September 21, 2018, 12:40 By Zheng Bingwen


At a meeting of the State Council, China's Cabinet, on Tuesday, Premier Li Keqiang said it is vital to keep the social insurance premium policy stable, which to a large extent has eased people's worries at a time when a new regulation on premium collection has aroused public concern.

The general offices of the Communist Party of China Central Committee and the State Council recently issued a reform plan for tax collection, which stipulates that premiums for pension, medical, unemployment, occupational injury and maternity insurance will be uniformly levied by the taxation authorities from Jan 1, 2019.

In fact, the taxation authorities have been collecting social insurance premiums for more than one decade. Social insurance premiums in 19 provinces, municipalities and regions are collected by the local taxation authorities.

In particular, enterprises have expressed concern over the uniform collection of social insurance premium by the taxation authorities mainly for three reasons.

First, the new regulation indicates the reform of the levying system as a result of institutional reform of the State Council. The enterprises are worried especially because they believe compulsory collection of social insurance premium will increase their expenditure on social insurance.

Second, since the taxation authorities are fully in charge of social insurance premium collection, the enterprises fear that the establishment of a new collection system will seal all the routes for the enterprises to escape paying the social insurance premium.

Third, the media have reported that lately the local authorities in provinces such as Jiangsu, Heilongjiang and Hubei have been making it mandatory for enterprises to pay the arrears in social insurance premium they should have paid in the past years.

These factors have increased the enterprises' concern over the new premium-collection regulation. Some people assume the reform will increase the enterprises' cost, and some enterprises have even begun to lay off employees fearing that "winter is coming".

Thanks to the current premium-collection system, the enterprises have managed to not pay a huge amount of social insurance premium. Take urban workers' basic pension insurance for example. It is estimated that the enterprises have paid only about two-thirds of the total amount of social insurance premium. Calculating on the basis of the data for 2017, this year the actual social insurance premium collection is 3.34 trillion yuan (US$487.71 billion), while the total amount should be 5.08 trillion yuan. The due amount is more than one-third of the total that should have been paid.

Three factors are responsible for the huge gap in the actual collection and total amount of social insurance premium.

First, the relatively developed coastal provinces absorb a huge number of migrant workers, but some enterprises there haven't paid their employees' social insurance premium in accordance with the mandatory 20 percent contribution rate.

Second, the number of workers whose social insurance premium has not been paid has increased from year to year due to the rising pressure of economic downturn and/or the poor performance of the enterprises. A survey shows that some employees have only paid their social insurance premium for the minimum 15-year period and stopped paying after that. Till last year, more than 55 million people nationwide had defaulted on social insurance premium payment.

Third, the contribution base of social insurance is not appropriate, which is the main reason for the reduction in social insurance revenue. The regulation says employees' social insurance premium should be paid according to their actual income. But since the pension insurance premium is comparatively high (employees have to pay 8 percent of their income and accordingly the enterprises need to pay 20 percent), it is estimated that only 24 percent of the enterprises pay the social insurance premium for their employees based on their actual income.

But if the taxation authorities across the country require the enterprises to pay the full amount of social insurance premium, it will indeed increase the social insurance revenue, but it will also remarkably increase the enterprises' economic burden making it difficult for many enterprises to survive.

Still, legal compliance with the social insurance premium collection policy is extremely important for reforming the social insurance system and promoting the rule of law.

To better deal with this contradiction, the authorities should make efforts on four fronts.

First, the recovery of social insurance premium for the past years should be unified nationwide. The local authorities could even "abandon" the idea of recovering the social insurance premium which the enterprises have not paid over the past years, but accordingly the enterprises should give in writing a commitment to pay the full social insurance premium amount for their employees strictly in accordance with the regulation in the future.

Second, the taxation authorities should cut the social insurance premium rate in order to reduce the enterprises' burden.

Third, the pension insurance system, too, needs to undergo institutional reform. The yearly increase of the social insurance premium payment base has greatly undermined the employees' sense of gain. Although statistics show the average salary increase is about 10 percent a year, many people feel their actual income has not increased at all. So a pension insurance reform is necessary because, without it, social stability and the credibility of the social insurance system will suffer.

And fourth, the fundamental way to deal with the ever-increasing social insurance premium payment base is to transfer some of the employers' premium payment to employees' individual account, which will eventually benefit the public.

The author is director of the Center for International Social Security Studies, Chinese Academy of Social Sciences.

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