The proposed legislation required all expat workers and their employers to pay a cut of their wages to the Chinese government beginning from October 2011. However, as we begin 2012, the tax has yet to be enforced.
It’s rumoured that Shanghai authorities have delayed the tax out of fear that expat workers may decide to leave Shanghai altogether. Beijing has already created the guidelines for the tax, and as Shanghai has not done so, there are murmurs that the local government is worried about an expat exodus.
One insider who wished to remain anonymous said: "If Shanghai is pushing back, it is primarily due to the fact that it is the international commercial capital of China and as such has the highest number of foreign employers and employees. It therefore has the most to lose from any exodus of expats whose employers are no longer able to justify the costs of employing foreigners in key roles".
The tax is split over five insurance funds including pensions, health care, unemployment, maternity and work-related injuries. Expatriate workers may have to pay around 11 percent of their salaries.
Shanghai expats have reacted negatively to the tax as many believe they will not actually need the services they will be paying for.
Shanghai is currently one of the fastest developing cities in the world and is home to more expats than any other city in China.