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Residents of 3 Chinese cities pay taxes and duties with digital yuan

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Residents in three major Chinese cities have started paying taxes, stamp duties and social security premiums using the country’s central bank digital currency — the digital yuan (e-CNY).

According to a domestic news report, a number of government agencies in Zhejiang province — located south of Shanghai — are conducting real-world trial programs in which citizens use the digital yuan to pay taxes.

The Zhejiang Taxation Bureau is working with the country’s central bank — the People’s Bank of China (PBoC) — to study a variety of tax payment methods using the digital yuan.

The PBoC and associated local government agencies are reportedly looking ahead to the next big test for the digital yuan, the Asian Games, which will be held in Hangzhou in September. Local authorities claim that the digital yuan could be used to streamline the calculation of tax-related activities.

Following successful steps in implementing the RMB digital pilot program, which began public testing in April 2021, the PBoC said it will seek to expand the program to other Chinese cities, including Guangzhou, Tianjin and Chongqing.

On the other side of the tax book, a local government has decided to “give away” 15 million digital yuan ($2.25 million) to its residents, hoping to boost consumer spending during the pandemic and encourage use of the new currency support financially.

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Around 130,000 residents of Shenzhen’s Futian District will receive a share of the 15 million digital yuan (e-CNY) in the form of a red envelope via Chinese social media app WeChat. The RMB digital airdrop marks the government’s latest attempt to boost spending in areas of China hardest hit by the recent Covid-related lockdowns.

In Chinese and other East Asian cultures, gifts of money are often given in red packets or envelopes, as the colored packaging brings good wishes and luck to the recipient.

These developments extend China’s already significant lead in developing a central bank digital currency (CBDC) for public use, with the majority of countries still in the research stages of CBDC implementation.

According to state media, digital yuan transactions across China totaled nearly 87.6 billion yuan by the end of 2021.