Wei Cui shares his journey since graduating from Harvard. He describes it as a 30-year journey, with three phases: first decade, where he continued attending school in the United States, second decade, where he practiced law in New York City and Beijing, and last decade, living in Vancouver teaching at the Law School of the University of British Columbia. This period was the favorite stretch of his life, partly because of having them as part of his life and partly because it was nice to live in a beautiful part of the world and pursue scholarship at a major research university. Wei’s life in Vancouver is different from earlier stretches in his career, especially from the years spent in China. He moved to Canada after spending seven and a half years working in China. The journey has been interesting from the perspective of Canada, as it allows him to think about these different parts of his life in the US and in China from the perspective of Canada. Cui’s journey began when he was in Harbor College on a student visa in the United States. After deciding to stay in the US, he found a terminal master’s program in philosophy at Tufts. He continued to study philosophy in Ph.d programs, then went to law school, where he became interested in China and the idea of law being applicable to China. He eventually graduated from Yale Law School in 2002, worked in New York City for three years, and moved to China in 2006.
Working As an Attorney in China
Wei worked in China for seven and a half years. He took up an academic position at China’s largest law school in Beijing, but the university was disorganized and he had a light teaching load. He took up legal practice part-time at a local Chinese law firm. In 2008, he worked at the China Investment Corporation (CIC), which invested in Blackstone and Morgan Stanley shares. In 2009, he was secunded to CIC and started setting up a tax practice in house. He also worked in consulting with the Chinese government, working extensively on tax policy projects. He left CIC in 2010, but by that point, he decided to focus more on academia. Wei’s third decade in China involved working with the Chinese government on tax policy projects. He was sought out for tax law and tax policy advice for seven years until 2013. In his third, Wei focused on research and teaching, focusing on the challenges of pursuing a career outside of China and in North America. He believes that focusing on academic work and pursuing a career outside of China helped him achieve his goals. He also talks about his current teaching role at the University of British Columbia and as an author.
Divergent Economic Development
Wei discusses various examples of social science scholarship, including the divergence in economic development paths and the study of ancient economic geography. He also discusses the field of philosophy, particularly the study of philosophy of mind and the foundation of self consciousness. The field of evolutionary psychology, specifically the study of cultural evolution, has gained significant attention. Wei’s scholarship was broad, focusing on tax law and policy, with a focus on the US and Canada. He mentions that his book on international taxation is driven by US tax policy, with Canada playing a secondary role. China, however, has made no significant contribution to international tax policy. Wei argues that the US is an outlier in terms of its tax system, with a tax revenue to GDP ratio of 27% compared to other OECD countries. This is a significant difference from countries like France and Germany, where the tax to GDP ratio is 40%. He also discusses the unique structure of the US tax system, which is radically different from what most listeners are used to. The US has a relatively low tax rate, especially for the middle class, which is referred to as “middle-class” in the Biden and Obama administrations. In conclusion, Wei Cui’s research on tax law and policy highlights the importance of understanding the unique structures and systems of advanced economies.
US Tax Revenue Redistribution vs. OECD Countries and China
The US does more effective redistribution of tax revenue than other OECD countries, such as France and Germany, which collect their revenue through pensions and payroll taxes. However, the US spends a greater portion of its GDP, distributing to the bottom 50% of the income distribution than these other countries. The US does not have a value-added tax, but rather low rate state sales taxes, which could potentially collect more revenue through a value-added tax. The US is also unusually reliant on personal income tax in collecting revenue, making it easier to afford less complicated tax laws. The US tax law is complicated, with the IRS being thinly staffed and heavily reliant on taxpayers and return preparers for tax compliance. The rule of law is crucial in this system, as it dictates how people should pay taxes and is followed by private parties. In contrast, China invests little in writing tax law and has many tax administrators providing taxpayer services. In China, there is a lot of individual discretion in tax administration, with each tax administrator responsible for different taxpayers and facing revenue targets. This leads to a more predictable and predictable tax collection process. Tax farming is another analogy used to describe the approach in Rome, where private societies auction off the right to collect taxes to private societies, collecting as much money as they want.
Tax Compliance and Tax Avoidance across Countries
Wei discusses the differences between societies that do not rely on a legal system and those that do. He talks about tax compliance and tax avoidance across countries. In advanced economies, cash collection mostly operates through business firms, which collect corporate income tax, sales tax, VAT, wage payments, interest payments, and creditors. As a result, individual behavior in terms of tax compliance does not matter as a first cut. There is quite a bit of commonality between countries and their modern tax systems, with richer countries having more big business firms to collect taxes for the government. However, there are variations in tax compliance and evasion across countries. For example, in Greece, most taxes are collected by business firms, while in the US, compliance rates for self-employed individuals are substantially lower than those employed by firms. This highlights the need for scholarship to advance and better educate the public about tax collection and evasion. From a tax law perspective, the biggest differences in China and the US are not in tax law but more in their systems of redistribution. Public finance systems define what these countries are like, making them more worthy of discussion.
Influential Courses and Professors at Harvard
Wei discusses his experiences in college and his connection to liberal political philosophy. He took a John Rawls’ course Theory of Justice and other philosophy courses, which he believes continue to resonate with him personally and professionally. Wei’s liberal philosophy was heavily influenced by his American experience in the 1990s, which he associates with American ideology. However, he finds it sobering that people do not subscribe to these philosophies and that academics and others who subscribe to them do not make much effort to persuade others of their correctness. Wei’s first irreversible awakening was the US invasion of Iraq, which he found morally wrong. He believes that what he learned from professors like John Rawls is partly what is creating a sense of discomfort and reflection about the world 25 years later. In summary, Wei Cui’s experiences in college and his journey to China, the US, China, and Canada have shaped his views on morality and politics.
05:32 Personal background, education, and career path
10:48 Legal career, academic research, and international tax law
18:51 Academic research in various fields
23:33 China’s tax system and its differences from other countries
30:02 Tax complexity and compliance in the US and China
35:06 Taxation, compliance, and avoidance across countries
41:53 Taxation, state capacity, and social safety nets in China and the US
48:18 Philosophy, politics, and personal growth
Wei Cui, Will Bachman
Will Bachman 00:01
Hello, and welcome to the 90 T Report. I’m your host will Bachman. If you visit us at 92 report.com. You can get the full transcript of this episode, the show notes, and you can sign up for an email. We’ll let you know about each future episode. I’m excited to be here today with classmate way it’s way, way. Welcome to the show. Thanks very much. Well, wait, I’d love to hear about your journey since graduating from Harvard.
Wei Cui 00:32
Sure, I just want to say at the start that it’s really fun to talk to you. So I’ve heard your intro about sifting times. This past weekend, when I sampled the different episodes on the webpage. And I it’s a really rich experience, are they entertaining, I’m so grateful that you’re doing this. So to talk about my journey, since Harvard, it’s been 30 years, 31 years, the quick version of that, there were three phases. For the first decade after we are graduation, I basically kept on going to school. And this was in the United States. For the next decade, the second decade, I practice law, first in New York City, and then in Beijing. And then for the last 10 years, I’ve been living in Vancouver, teaching at the Law School of the University of British Columbia. So I tell my children that these last 10 years, were the favorite stretch of my life. That’s partly just because of having them as part of my life. It’s also nice to live in a beautiful part of the world and pursue scholarship at a major research university. But there is an additional dimension that I thought it would be fun to talk about. Because the life I’m living now in Vancouver is very different from the earlier stretches in my career, especially from the years I spent in China. So I moved to Canada after spending seven half years working in China. And I didn’t expect to be in Canada. And how I ended up here definitely has a lot to do with how I left the United States and went to China. So anyway, that’s sort of a overview of the journey. And I’m sort of interested in talking about this also, because I’m thinking about these different parts of my life in the US and in, in China from the perspective of Canada. And I find that very interesting.
Will Bachman 02:42
All right. Okay, so let’s hear the story I am, you have, you have set up like the frame of this, where it’s now a bit of a mystery novel, I want to, I want to hear about how you left the United States and how that led to China and how that led to Canada. So tell me, tell me the story.
Wei Cui 02:59
Okay, so as I go through these in proper chronological order. So I was in Harbor College, I was in the United States on a student visa. And I, I’m not sure whether you’ve interviewed other people like me. And so at the end of college, we all faced a question of how to stay in the United States. And the main choice we had, definitely I had was to keep on going to school. And I had majored in social studies at Harvard. And that was not a academic discipline. I had a clear graduate degree. And I became interested in analytic philosophy at the end of college, and I wanted to study more. And so in senior year, I decided to look into how I can continue to study in the US, but also just in the field of philosophy. What I found immediately was that next door at Tufts, there was a terminal master’s program in philosophy where students can take philosophy courses, and then maybe continue PhD studies elsewhere. So I attended that program and stayed in Boston. In fact, I stayed in Cambridge because I had to work on the side to partially make a living. And so I had a second career at Harvard. My first one was going to college and I was in Dunster house. But then I worked as a Master’s assistant in courier house for the next three years when I work on my philosophy degree at Tufts. After tufts, I continued to study philosophy in a couple of different PhD programs, first at Rutgers in New Jersey, and then at NYU in New York City. And that was a long stretch I. At that time, I thought that I would never stop studying philosophy. But I did leave philosophy. I went to law school eventually and by the time I went to law school I just to make progress to our story. By the time I got to law school, I was thinking about China and going to China, I had to come from China. And it’s I don’t know, if you remember our freshman year, the second semester was when the democracy movement in China happened in the first part of 1989. And Harvard wouldn’t actually a center for scholarly and policy discussion about the prospect for democracy in China. So I was very influenced by that. And that was partly why I wanted to study social theory. When I studied philosophy, I had put that interest aside for a few years. But when I decided to leave philosophy, going to law school, I thought, China may be something that I want to engage in. And at that time, in 1997, when I applied to law school, China was laying off a lot of workers from its state owned enterprises and announcing sort of an irreversible transition to the market economy. So the idea of law being applicable to China was becoming, I would say, sort of plausible for the first time, as so. So basically, by the point I entered law school, I was sort of a goal oriented, in trying to learn things that I thought might be helpful for productive engagement with China. But it was not straightforward. I ended up with tax. And this is partly because I didn’t feel stimulated by some of the other topics in law that I explored, while tax seemed more interesting. Partly because of the connection to economics. I also thought that, you know, I’m interested in tax, and there’s no way that tax is not important to China’s definitely seems that it should be important than China. So you can say that for the next 20 years, I sort of explored that intuition. I feel I’m right. But I’m still working on convincing others of that evaluation of a career. So I graduated from Yale Law School in 2002, then, and then two, I worked in New York City. Practice for three years. And then I moved to China in at the beginning of 2006. And I did this until 2013. So I was in China for seven half years. And that was definitely an adventure. I mentioned at the beginning, I was on a student visa. When attending Harvard, I was lucky that in the 90s, my parents finally immigrated to the United States, he naturalized and so I became eligible for naturalization without getting a job in the US studying philosophy of this time, just because of my parents. And by the time I left for China in 25, I was. So I think it was the beginning of 2006. Just a few weeks before I moved to China, I became a naturalized American. And it’s odd because after that I basically lived overseas ever since.
Will Bachman 08:30
So that was the first phase. Yeah, well, even I’m interested actually in phase minus one or phase zero. There were in our day, there weren’t as many I think, international students as maybe Harvard has today. Can you tell us just the backstory of, you know, kind of your upbringing and high school and how you ended up at Harvard? I, you didn’t explicitly say it, but I’m assuming that you grew up in China. And did you end up in the US? Yeah, I
Wei Cui 08:59
did. I did grow up in China. And you’re right, that the international students was or a small population at Harvard. I knew some, but I think I’m pretty sure that there were not that many. So what happened to me was unusual. My parents were academics. They visited us in the mid 80s, as visiting scholars in New Haven. And so I had come to the United States in 1986. And entered high school with their I did 11th and 12th grade in New Haven, and I was just very lucky at the beginning, somehow found a scholarship at a private school that had very good supportive college counselors and teachers, and very lucky and got into Harvard, started in 1988. And so that was that was unusual. First rule. And, of course now there are many more international students, many of whom come directly from China or other countries. I had this unusual stint for two years of high school in, in the US and then getting into Harvard from a US High School.
Will Bachman 10:19
And how was that transition from the the Chinese school system to us school system. And then to Harvard, I heard that the kind of Chinese public education system about rote memorization and so forth, and what was that transition like for you? Yeah.
Wei Cui 10:40
Well, so if we talked about that we can spend the next hour instead of talking about what happened later. It was. Yeah, I think it was a very rich experience. Again, I would just say that I was very lucky and to, to have had very encouraging teachers. I was exposed to a lot of things that I wasn’t exposed to. In China, and Tao was not only obviously in the humanities and arts, which were not really instructed in, in China, but also even in math and science. I saw how smart US students were when they were dedicated to math and science. And so a lot of that was very eye opening.
Will Bachman 11:31
Okay, cool. Your work in China? Did you kind of work for international law firm that you had worked in New York, and it was sort of a global corporate thing? Or did you find a local Chinese law firm? Tell us about the work that you did as an attorney and show? Yeah,
Wei Cui 11:48
yeah. So when I was I arrived in China insurance, six. So I was already 36. I had a few very interesting years in China. And those seven and a half years definitely shaped my scholarship, subsequently, but also just my view about China in general. And my stint in China was unexpectedly Rich, I would say, so I went actually took up an academic position at China’s biggest law school in Beijing. But I had a light teaching load. And the university was very disorganized. And so it was not clear. With a tight light teaching, load and disorganization, that you know, I need to be spending a lot of time there. So I immediately took up tech, legal practice, part time, so the law firm I worked for in New York since Natcher. Opened a Beijing office, certainly after I moved to China. And they reached out to me and said, you know, we’re interested in having a US tax person here. Would you be interested in working for us part time? And so that opportunity didn’t exist just the year before? And so I agreed to do that. And so yes, I continue to practice law, somewhat to my surprise. And one important thing that happened, important thing to me was, in 2008, I was working at some snatcher. China’s started a big sovereign wealth fund, called the China Investment Corporation. And like other American firms, since the natural was trying to get business from CIC and CICS first investments were in the United States in Blackstone, and in the shares of Morgan Stanley, and Simpson natural was connected with Blackstone, of course. And so in 2009, I was seconded to CIC, and basically started setting up a tax practice in house at CIC for the next couple of years. So those were very special, interesting opportunities. I think, in retrospect, what is most valuable is, you know, I’m not practicing law anymore. So all of that transactional experience is something from the past but I basically got to work at a state enterprise that was more similar to the university that I was working at, which is also a state owned institution, compared to some some natural or private law firms. So I did that and, in fact, all the way until I left China in 2013, I was practicing on the side so I left CIC In 2010, but by that point, I was already doing enough Chinese tax law that I was invited to start sort of a China Tax Practice at Clifford chance, which had a big China practice in Beijing and other Chinese cities. So I did that until 2013. So basically, aside from my academic physician, I was practicing a lot, I think of those years as mostly practicing. And then there’s a third job I sort of had, besides teaching and practicing law, which is, I did a lot of consulting work with the Chinese government, working extensively with national agencies on tax policy projects. So that was completely unexpected, because as I had mentioned, I got a US passport. Before going to China, I didn’t know that the government would be seeking out the expertise of foreigners, but I, I was sought out for tax law and tax policy advice for all the seven years up until 2013.
Will Bachman 16:10
Wow. Okay, so let’s go into your third decade. I want to hear about Ghana, your research and your teaching.
Wei Cui 16:20
Oh, okay. Yeah. So I, basically, when I was in China, I was doing all these things. The idea of pursuing scholarship and having your own subject matter, was not on the wayside. But I was not sure whether I will find that. And so I was actually happy to be practicing. Because what is my subject matter as a scholar, I didn’t quite know. But by about 2010, I had enough projects for topics to write about. And I was struggling to find time to write on them. So I wanted to focus more on academia, and decided that really, if I want to become a photon school or doing academic work, I’m better off in outside China, back in North America, so I was able to find a job at the University of British Columbia. And in some ways, the last 10 years was much more straightforward. I had, you know, one job, I could devote my time to it. I taught myself enough Canadian tax law to teach it. And that’s what I do. I teach tax to Canadian students, and most of it is Canadian tax law. And it’s about producing scholarship. So, law professors normally write articles, I worked on a couple of books. I finished a book about Chinese taxation, two years ago, and I’m writing another book about international taxation now. So what is really fun, and particularly relevant for this conversation is that so I basically left academia, you can say that I was in school for 10 years, I was immersed in academia, I went to practice law. When I came back to academia, I found that some of the topics that I was interested in, back in the 80s, and 90s, were topics that scholars have made substantial progress on was really gratifying to come back and say, these topics that I was interested in 1020 years ago, there’s actually a progress, and I can learn from,
Will Bachman 18:42
what’s an example, what’s an example of something? You’re about 1989? And then you found out
Wei Cui 18:48
Yeah, absolutely. There are many examples. Let me say that I will give to give to. One is in social studies, you know, when you take took the basic social studies course, one person who taught it was David landers from the economics department. And he talked about how country’s development path diverse diverged, and European American countries became subsequently richer than others. So that idea of a divergence in the path of economic development, that’s fairly recent and social scientists want him to explain that divergence, of course, is a very big field of social scientific inquiry. So a lot of us without pursuing academics will have heard of the work of people like Toronto automobile or you know, back in the late 1990s Teradyne Diamond’s work on gunsteel germs. And so all explaining this grant pattern of economic development So I will say bass one field where scholarship really progress and different areas of social science inform each other. And so you have, you know, very ancient economic geography. And then you have studies of particular economies and civilizations, how they determine the path of economic development. So that’s one area. And that’s one area of active research where, you know, there’s just a very great wealth of information and new insights. Another area relates to what I worked on in philosophy, I was studying philosophy of mind and the foundation of self consciousness in particular, that was my main field. And the area of evolutionary psychology, the study of cultural evolution, is another area that has really taken off. And one of the professors who currently teach at Harvard was not there before. His name is Joseph hemorrhage. And he and many scholars, like Han really nurtured this field of cultural evolution that is deeply informative for understanding the origins of our culture. And some of that relates to issues in philosophy of mind. So that’s another example.
Will Bachman 21:29
Tell us a bit about your research.
Wei Cui 21:34
Oh, okay. Thank you for asking that.
Will Bachman 21:38
We can get into the leads, I saw that you do, like stuff around tax avoidance, that’d be perfect. I’d love to hear about that. And what, what have we learned about
Wei Cui 21:47
you know, you know, one, one thing that scholars have is like, we always have a lot of presentations, and you gotta ask us to do presentations anytime we’re having to go over them. Yeah. So thank you for asking that my scholarship is fairly wide ranging. And so I do tax law and policy. And that is, you know, so I like to think that there’s a scholarly discipline that’s informed by law by economic analysis. And so there are Canadian issues that I study, there are US issues I study, but what’s driving my scholarship is something that’s in common. And so that’s an area that I work on. So for example, the book I’m writing on international taxation, a lot of it is driven by US tax policy. And so Canada plays a secondary role. So does China, China really doesn’t did not make any important contribution to international tax policy. Until recently, and so focused on history of this area of policy and the US and Europe, and so on. So what is rewarding for me, is at the stage of my career, I can range fairly broadly into other areas, I don’t have to say that the only thing I know is doctrine in this particular ecosystem. One can draw on discoveries from the social sciences, from particular areas of history to produce scholarship that addresses current policy questions, but also answer questions about history. So that’s a sort of a broad characterization of what I enjoyed doing. Maybe I’ll say a little bit about the book I wrote two years ago, published two years ago, which is on Chinese taxation. And that’s sort of an example of the kind of scholarship I’m doing. Chinese taxation, first of all, what seemed to most people who might listen to this episode as a very esoteric topic. And so definitely the book was not written for a popular audience. At the same time, for me, it was a really fun book to write. Very little of it was about Chinese tax law. In fact, a major claim of the book is to say that law doesn’t really matter for Chinese tax collection. But what’s interesting about that is, law is a big part of tax collection in a lot of advanced economies. In fact, the importance of law is under recognized in places like the United States and Canada. But it’s quite interesting that the second largest economy in the world can organize the second largest tax system in the world in a way that’s radically different from how we normally think about the organization of modern tax collection. Well, that’s
Will Bachman 24:59
a little bit more about China’s I’ve heard, I think I saw something about. There’s like no property tax in China and that cities raise funds by selling off land or developing land or something, but maybe that I’m way off base, just give us a an overview for someone who knows nothing about China tax, which I would be one would give us a little overview of how it’s different than what, you know, majority of the listeners are used to.
Wei Cui 25:27
Okay, sure. Yeah. That’s a good question, I think, to answer a question like that, scholars always, like me always want to say, well, let’s take a step back. And so, you know, what are the preliminary things I want to say? I want to say that the United States is a far outlier in terms of its tax system. And so when you pick to the tax system of any other country, if you take the US as a reference frame, that immediately is sort of tricky, because you’re taking an international outlier, as, as a reference frame
Will Bachman 26:11
weighs us an outlier.
Wei Cui 26:14
The US is an outlier in several ways, the overall tax collection and the US is quite low compared to other OECD countries. And so the tax revenue to GDP ratio in the US is about 27%. Whereas for the OECD average is 34. and Canada is at 34. This so that’s already a big difference. And then you go to countries like France and Germany, where the tax to GDP ratio was 40%. And so in, in the US, we can say that people are relatively low tax, especially people that we think of as being in the middle class. And so you know, but to the Biden administration, that means people with annual income less than 400,000, to the Obama administration, that means people with income less than 250,000. The idea is that whatever you want to call those groups, they really shouldn’t be called middle class, but if you call them that, they’re generally taxed in a pretty light fashion. So that’s number one. Number two is the US does seem to succeed to use the tax revenue to help the poorer half of its population and does a substantial amount of redistribution, and does it more effectively than other countries?
Will Bachman 27:42
The US, the US does more effective redistribution, you’re saying?
Wei Cui 27:49
Yes, that’s, that’s a factor that’s not well known. But that’s, you know, scholars are trying to come to terms with. And so when you look at France and Germany, other European countries, a lot of times they are collecting their various sizable tax revenue, in through pensions, payroll taxes, and they just give that money right back to retirees. In a way that’s not necessarily efficient. And so the tax on labor is very high in those countries, but all it’s doing is to recycle it through pension plans, the US doesn’t do that the payroll tax rates are very low. And so overall, the tax burden is low. But it turns out that the US spends a greater portion of its GDP, distributing to the bottom 50% of the income distribution than these other OECD countries. Yeah, that’s that’s a very interesting fact.
Will Bachman 28:52
What about just how we collect the tax? I mean, I think of income tax, corporate tax, you know, property tax, do other countries vary significantly, like maybe they do a different kind of income tax, or they do value added tax. We don’t have that. Like, what are some major differences?
Wei Cui 29:11
Yeah. So you’re right. A big difference is the us not having a value added tax, having fairly low rate, state sales taxes instead. And so definitely a lot more revenue could be collected in the US through a value added tax. I think that will be a major difference. The US is unusually reliant on the personal income tax in collecting revenue. So that that’s some of the differences and generally the fact that the tax rates are pretty low. So being here in Canada, if you earn 200,000 Canadian dollars, you are in the highest income tax bracket you repay 52% marginal tax rates, you know, of course that’s not the case. In the US, wow. Yeah.
Will Bachman 30:02
What about people complain about oh, in the US, it’s so complicated to fill out your taxes and other countries, it’s you just sort of sign a form or something. Is that true? Do we really have a much more complicated tax code in the United States than then maybe in Europe?
Wei Cui 30:21
I think that is true. And there are a couple of things to point out and maybe I can try to connect this with China. And so the, the United States, tax law is complicated. But I would say, you know, Canadian tax law is pretty complicated as well. The US is just an extreme version. And, you know, when the US is so reliant on the personal income, tax income taxes everywhere, are more complicated than value added taxes. And so you know, if you rely on the income tax less for your revenue, you can afford to have less complicated income tax law. There’s another dimension, which is the United States, you know, the IRS is thoroughly thinly staffed. And so if you look at the ratio of IRS employees to us working population, I think it’s about 3500 US citizens for one IRS employee, whereas that ratio in Canada would be 1000, to one. And so what happens in the United States is, you know, the government heavily relies on taxpayers themselves, as well as return preparers and so on to do the tax compliance, the government itself invests relatively little in the administration. And so this is where the rule of law is really important. If you want people to pay taxes, and you are not really handling that yourself. You’re asking private parties to get the tax to you. The rule of law is a you know, you would say, an indispensable indispensable tool, you just tell people what to do. And you write down write down complicated rules, people, for the most part, follow them. And you collect tax that way. Where as in other countries, I would say in OECD countries, people would do that, but there’s better taxpayer service. And then if you go to China, so this is what I to talk about in the book, China invest very little in writing tax law. China has a lot of tax administrators that are providing taxpayer services. And so taxpayers find out about what they need to do from the tax administrators. It’s more important what the tax Administrators say should be done. And as a result, you have a system that relies very little on what’s written down, but more on interactions with tax administrators. So that’s one thing in that respect to China is an outlier. And the US is the other extreme.
Will Bachman 33:23
So in China, I mean, if there’s meaningful, there’s not very, like, doesn’t rely on the laws so much. Is that just going to open to the scope of the the tax administrators decisions? Or is it more like they have internal regulations and rules and so forth? That or do they just say, you know, I don’t like this guy, I’ll charge them more tax. I mean, how do they, how do they decide?
Wei Cui 33:51
Yeah. Yeah. No, you ask a good question. So this is partly what my book is about. There is a lot of individual discretion in China. And at the same time, each tax administrator is responsible for so many different taxpayers and they face revenue targets, they need to raise a certain amount of revenue. So that the dominant effect may not be individual discretion. It’s just the way taxes collected. And so a lot of times it’s in deviation from the law, but I’m not sure that the fear is a tax administrator constantly arbitrarily picking on you. It’s more that, in fact, you know, a lot of taxpayers get comfort, interacting with tax administrators because you observe this person and you know, what he or she wants, and it’s sort of predictable in a way that, you know, in other places, we rely on what the law says for predictability, whereas in China, people simply rely On the observability, of a nearby tax collector,
Will Bachman 35:03
so they have revenue targets. That’s so interesting. It reminds me I’m just reading this book right now called for profit, that talks about the, in Rome, how they would farm out the taxes, they would auction off the right to collect the taxes to these private societies that would go off to Syria, and you know, have the right to basically collect as much tax as they want. They just had to pay Rome a certain amount. It sounds like, you know, I mean, it is not the same thing. But so they would give you know, the local tax office, you have to collect so much money and good luck and go get it.
Wei Cui 35:38
There are definitely analogies, what you’re talking about is called Tax farming. And so my book talks about how there is a substantial degree of tax farming in certain parts of the Chinese tax administration. Yes, you’re right, in pointing out that analogy. The, I guess, as a scholar, I would just say that there’s overall point there all these interesting? Well, you know, most people don’t think about tax. And so this sounds like a fairly esoteric, may be interesting when you talk about it. But there’s an overall message, which is, you know, putting aside all these esoteric things about tax, the overall message is look at a society that is able to have very large scale social cooperation, social coordination. And that could be tax collection, you know, Recycling 20 25% of GDP through the public finance system. Or it could be other things like maintaining stability, public order. Imagine a society that does all these things, substantially without the help of a legal system. That’s a fundamentally different way of organizing your society. And what I tried to show is that, you know, through the example of tax, that’s what China does. And in that way, the China that we are talking about every day is a very different society, from the societies that we live in, in North America and elsewhere.
Will Bachman 37:18
In your book, what were some of your arguments around how we societies is different when it’s when it’s set up that way, when it’s not relying on a legal system? So much, but some other method? What? How would you characterize that society, or just or differentiate it, or contrast it with the US society that a lot of listeners are familiar with?
Wei Cui 37:41
Yeah, so I would characterize ISIS as it’s a society that’s peaceful, that is orderly. And through the field of taxation is able to accomplish a substantial amount of work that a good modern government’s supposed to do, which is providing public goods and services, engaging in redistribution, setting up a social safety net. And so all those things, China, quite impressively, has been able to do within the last 25 years. But doing so without these organizing principles, such as the rule of law, and, and so that makes the, the fabric of social life in China, very different. And so, I like to say that you no one can experience this immediately. And so for people living in China, it’s not a very interesting topic to say, do we have the rule of law or not? But you know, outside China, there’s this perpetual discussion about whether there’s a rule of law and in China, to people living in China, it’s pretty obvious that we don’t, but at the same time, the rule of law is clearly, you know, not the only thing that matters. And it’s quite striking how a society is able to, you know, organize so much social cooperation towards some kind of prosperity without the rule of law.
Will Bachman 39:18
Talk to me about tax compliance and tax avoidance across countries where you’ve looked at it. I’ve heard that there is quite a bit of variation.
Wei Cui 39:34
Variation, we see. Sure, yeah. So for me, that’s actually a thoroughly you know, there’s a few basic things to say. So So I’ll tell you my view. So basically, in advanced economies, cash collection mostly operates through Booz As firms and so business firms collect, you know, they pay the corporate income tax, they collect sales tax pay the VAT, they withhold tax on our wage payments, they withhold tax on interest payments, to creditors. And so most of tax compliance actually happens in the sphere of the business firm. As a result, how we as individuals behave, in terms of tax compliance does not matter, as a first cut. And so when you see that, you know, tax compliance is mostly secured by business firms, it doesn’t matter what the social attitude is, doesn’t matter what we do as individuals. There’s quite a bit of commonality between countries and their modern tax systems. And this is not surprising. The modern tax system really emerged in the last 100 years since the beginning of the 20th century. And then there’s some kind of uniformity in the way how people do it. So because of that, the topic of tax compliance and tax evasion is not, it’s not as interesting as you might first think. And so what’s. So that’s, that’s the rich countries in the world. And then there are poorer countries in the world where they’re not enough big business firms to do this for the government. And so tax compliance is substantially lower. So I think that’s probably the basic thing to keep in mind. What kind of variations in tax compliance and evasion do you have in mind? Do you normally think about well?
Will Bachman 41:52
Oh, well, I remember when there was all this stuff with the crisis in Greece, the economic crisis in Greece, you’d see articles about how, and I’m not saying this for my own personal knowledge, right. But you’d see articles about how there’s a lot of tax evasion in Greece. And so they were really struggling to, you know, collect enough revenue, to pay their bonds and so forth. And I’m curious if there are, and I’m also kind of interested in your historical perspective. There’s that book, seeing like a state by I forget the author’s James somebody. And, yeah, it’s like how, how states have wanted to, you know, be able to make their populations legible. So they could do things like raise armies, or tax their population. And it’s interesting, actually, that, you know, tax evasion is not such an area of scholarly interest, I would have thought that would be something that, you know, the way you structure it, the way you collect it, the way you have the forms, you know, are there nudges all that kind of stuff around making tax evasion, less likely?
Wei Cui 43:00
Yeah. So well, I hear what you’re saying, I think this is where, you know, scholarship needs to advance we need to better educate the public. There are all kinds of social scientific work talking about tax collection, because that is a fundamental aspect of modern states capacity. And there are theories that are more familiar to general readers coming from. I think, James Scott, and maybe because they write about state capacity, but the theories of tax collection in that work may not be the correct ones. And so making society the economy legible to the state, I would say is maybe the misleading formulation. Yeah, so you know, if you look at tax compliance in Greece, I bet, you know, most taxes in Greece are collected by business firms. And if you look at doctors and lawyers, other self employed individuals in Greece, evading taxes left and right, well, at the compliance rate for self employed individuals in the US, is also substantially lower than people who are employed by firms. And so I’m not sure if the differences there are are so pretty
Will Bachman 44:23
interesting, interesting. From a tax law perspective, you would like to have clear, crisp answers and you kind of refer to that and China, you know, the person it seems like in tax law, there are some things that it there’s not a clear answer, right? Like your business might be trying to sort something out, and it might be quite a bit of ambiguity, given International Tax different jurisdictions and so forth. You know, as a practicing attorney or a scholar. Yeah. Talk to me about that aspect.
Wei Cui 45:03
I think let me say this. From my perspective, I have practice law tax law. In China and the US I teach tax law in Canada. I think the biggest differences in these countries are, the more interesting differences are not in the tax law, because that’s what we focus on as legal specialists, but more in their systems of redistribution. So, you know, I think of public finance systems as these countries as defining what these countries are like. And that’s sort of, you know, more worthy of discussion. And I would say that, you know, I don’t know, well, how often you come across reporting or media coverage about China in the US? Of course, as I read a lot of that I digest a lot of that. One thing that you might note, after today is I would say that there is very little discussion of redistribution in China. You know, what is the social safety net in China, how much redistribution is being done? There’s very, very little discussion about that. But in fact, I would say that that’s those are some of the defining features of China. So some of the amazing things that China has accomplished in the last 20 years. And you know, even 15 years ago, when I went to China, one could not expect these things to have to be accomplished, was setting up a basic social safety net, that matters to the well being of a lot of people. And so you can ask the question, how, how did they do it? It’s not easy to do and why were you no politician politicians in China willing to do this kind of thing. But I would say one of the amazing things that China has done is to to build a social safety net. And in the last 10 years, there’s substantial cut back to the tax system. And so Xi Jinping has launched a lot of tax cuts in in China. And so for someone like me or anyone else, who cares about China’s tax and transfer system, this is very alarming, but you never hear about that outside China, and especially, there’s very little coverage of that in the United States. And so those things matter. I think those things shouldn’t matter to Americans. And knowing a little bit about how things work there is really important to understand, for understanding, let’s say, Where does the Chinese government gets is legitimacy? Why are so many people supporting the government? Well, having a good social safety net is a pretty big part of it.
Will Bachman 48:18
Let’s turn back to college. Are there any courses or professors that you had that continue to resonate with you? Either personally, some personal interest or professionally?
Wei Cui 48:31
Oh, yeah. So that’s, that’s something that I love to talk about in the remaining time. And this is something I want to say about my not just about college, but the first 10 years I had after college. So my third year in college, I took John Rawls course on his theory of justice. And then I took some other philosophy courses are an important part of my philosophy, education, or was exposure to modern political philosophy. And I would say that, in that fear, you know, liberal political philosophy was pretty mainstream. And so we read people like Ross, Donna Dorkin, we talked about their criticism of utilitarianism, but all of these are academic theories about morality, about politics, that I that was part of my education, and that, you know, still drive how I engage in my moral reasoning. And what’s interesting well, is that in the 1990s, I was living in this ivory tower and going to graduate school, but that was also my, you know, substantial for substantial American experience of living in America. So for a long time, I associated this liberal philosophy that I learned in academia in Ivory Tower, with being an American with American ideology, and so that that had a heavy influence on me. And if you think back to the 1990s, during the Clinton years, especially, you know, we talk about that era as the height of liberal ideology, the years that people call it the end of history where you can sort of take for granted, I think a lot of people took for granted that these ideas are simply right, and the rest of the world will come around to these ideas of liberal philosophy. So for me, personally, those ideas were very important. And what I find very sobering today, living in Canada, having lived in China and have lived in America, I don’t have a strong sense that people actually subscribe to those philosophies. And I don’t have a sense that those people, the academics and others who subscribe to those philosophies actually make much of an effort and persuading other people of the correctness of those ideas. And so that is a really poignant thing to think about in thinking back to college, what I took to be the theories that gave me and I thought my generation sort of moral guide, what is the right thing to do in the world, and in, in real experience, actually is not the guide for many people. And it’s not necessarily the guide to our governments. And so for me, the first sort of irreversible awakening, I think, was just before I left the United States was the US invasion of Iraq. It was very hard for me to understand how people can’t let this happen, it seemed to be morally wrong. But here we’re doing it. And there are many subsequent episodes that are like that. And so we can say, that’s really important for me what I learned from professors like John Rawls, and it’s partly what’s creating a sense of discomfort and reflection 25 years later, 30 years later, about what’s going around in the world.
Will Bachman 52:27
Well, what a journey on a journey to China to the US back to China to Canada. Way, where can listeners find you online? If they wanted to follow up with you or find out about your research, but your books? Is there any links that you’d like to share?
Wei Cui 52:48
Oh, sure. Yeah. So thanks for asking. I’m on LinkedIn, as you are. So we’re connected. I’d love to connect with people through LinkedIn. I think that’s one source that I go to, probably more often than anything else.
Will Bachman 53:02
Okay, well, we will include your LinkedIn URL in the show notes. Way. It was amazing. hearing your story, getting some inside views on different tax systems. I can totally nerd out on that kind of stuff. Thank you. Thank you. Thank you. So
Wei Cui 53:19
thank you. Well, it’s really fun. I look forward to hearing more episodes from your project. This is really wonderful. Very good.