Millions of Chinese looking forward to the nation's traditional Moon Festival this month could be left with a nasty aftertaste from eating mooncakes, after authorities warned that they would tax those receiving the baked delicacies as a gift from their employers, and recalled certain brands as substandard.
Official media reported ahead of the festival, which typically features poetry, moongazing picnics, and lanterns, that the government had warned employees it will count free company mooncakes as taxable personal income.
A typical corporate gift of mooncakes valued at 300 yuan (U.S. $47) is likely to generate a tax bill of 60 yuan from China's increasingly hard-line tax authorities.
U.S.-based scholar and former Macau University professor Cheng Tijie said the Mid-Autumn Festival is an important event on the Chinese calendar.
"It's a joyful festival, when it is meaningful for people to make gifts of mooncakes to friends and family, and for employers to give them to employees," Cheng said.
"I think a 15 percent taxation rate is too high," he said, calling for a parliamentary debate on the topic.
U.S.-based scholar Ran Bogong agreed. "The city leaders, including the Party secretary, should realize that the Mid-Autumn Festival is a joyful time when everyone eats mooncakes," he said.
He said only the highest earners should be taxed. "They should cut taxes on the middle classes," Ran said.
The announcement sparked a furor online, with netizens posting angry and sarcastic comments.
User "123456" commented on the official China Daily website's report last week: "If the mooncakes are taxable, I'd rather not receive such benefits."
A second commenter expressed disbelief: "I can't understand what the government officials are doing now!"
One user identified as "Expensive Gifts" said the government should have better things to do with its time.
"The Tax Authorities should be spending their time chasing after the recipients of expensive gifts like cigarettes and liquor, instead of the mooncakes!"
But others supported the taxation of expensive corporate freebies to high-earning individuals. "You probably didn't notice that the mooncakes nowadays are as expensive as those cigarettes and liquor," responded a third netizen.
A poll on the popular microblogging site Sina Weibo showed that more than 96 percent of 5,000 respondents said they opposed the tax.
A nasty surprise
Many employees are still unaware of the proposals to tax mooncakes, and could end an already expensive holiday season with a nasty surprise, state-run media reported.
The online version of ruling Communist Party mouthpiece, the People's Daily, went so far as to pen a critical opinion piece.
"The cakes are subject to consumption tax when they are bought, so should not be taxed again when given to workers as a benefit," said the commentary.
But officials defended the move, saying it was in line with existing taxation of benefits-in-kind.
"All in-kind benefits, such as gasoline cards and mooncakes, are taxed as part of the individual income according to the regulation," state taxation official Wei Yan was quoted as saying by the China Daily.
Meanwhile, China's food quality regulator has ordered the recall this week of several brands of mooncakes it said were "substandard."
The General Administration of Quality Supervision, Inspection and Quarantine said it had carried out tests on around 300 different mooncake products ahead of the festival.
It reported "high bacterial content" in mooncakes produced by several companies, including Lanzhou Tianshengyuan and Changchun Jiangbo Food Company.
The mooncakes were examined for chemical composition, hygiene standards, food additives, packaging, ingredients, and bacterial counts, the official Xinhua news agency reported.
Mid-Autumn Festival, which often runs into the Oct. 1 National Day holiday, starts on the 15th day of the 8th lunar month, when the moon appears at its roundest and largest.
This year's Mid-Autumn Festival falls on Sept. 12.
Reported by Xi Wang for RFA's Mandarin service. Translated and written in English by Luisetta Mudie.