HERE it is, we're already well into the month of August, and with my workload substantially reduced, now that 'tax season' is over, I've got both the time and research material to work on tax articles but do so with reluctance because my iPad is only single tasking. This would not be a problem if I did not do my daily writing on the iPad.

I also watch baseball on my iPad. The feed for Major League Baseball is far superior on my iPad than my office computer. I want to watch a baseball game simultaneously with writing. In a 'perfect world', a world without internet interruptions, that would be 'standard'. Alas, it simply can't be done in China.

I can assure you that with a good, clear broadband transmission, watching the baseball game will be my task (and getting back to writing this essay, later) - such are the simple realities of my tax life!

So Just what are the Chinese doing, tax wise, that you should be aware of?

Well, my friends, in order to find out, you're going to have to first read through the following US tax section.

More U.S. from me? Why not? I work with US taxes most of the time, I've been doing US tax work for 45 years. It's ingrained within me and it is perhaps, easiest to get me started communicating about US taxes than any other system.

Let's start off with a letter I am sending out, this week, to all of my clients for whom tax work has been scheduled between now and the end of September, 2011. There are new rules in effect, enforcing strict regulations as that apply to eFiling. Now please don't misinterpret my discussing this as a ploy for unabashed, self-promotion: my 'practice' is less than a quarter of the size it was five years back - and I'm still reducing my current client workload....so no, I am not looking for business but I do want to alert you to the fact that if you are a US tax filer: a) remember that you do have obligations to file both tax returns and FBAR returns each and every year; and b) you do not have to eFile!

There is a specifically permitted exception to eFiling: As long as this letter, is signed and dated by the taxpayer(s) and I have that original, signed copy, then I can release my prepared tax return to you for you to file. This year the 'minimum', under which, as preparer, I could 'avoid' (remember: 'avoid' is good; 'evade' is bad!) eFiling is 100. I'm not yet at that number but it is likely that I will go over that amount, hence, I may prepare the return but if I do not have the following letter, in hand, I cannot give you the tax return ... and since, next year, that number goes down to 11, an updated annual letter, under the current rules, is just going to become a standard operating procedure for me...

"My tax return preparer, Laurence E. Lipsher, CPA, has informed me that he may be required to electronically file my 2010 individual income tax return, Form 1040, if he files with the IRS on my behalf. I understand that electronic filing may provide a number of benefits to taxpayers, including an acknowledgement that the IRS received the returns, a reduced chance of errors in processing the returns and faster refunds.

I do not want to have my return electronically filed and I choose to file my return on paper forms. I will mail or otherwise submit my paper return to the IRS myself. My preparer will not file or otherwise mail or submit my paper return to the IRS.

Very truly yours, Date____________________ Social Security Number____________________ date

Only since the advent of electronic filing - eFiling - have preparers primarily filed on behalf of their clients. Prior to that and currently, for preparers like me who have never eFiled for clients, we send the tax return to the client for submission to the IRS.

Yes, you might get recognition that the IRS has received your tax return that was eFiled but then, what about the international postal treaty to which the US is a signatory? The moment I send anything to the IRS by EMS from the post office, it is considered to be in the hands of the IRS. That chopped and date stamped receipt from the post office is 'gold', insofar as proof is concerned.

Refunds? These are exceptions for my clients - why pay anything more than one absolutely has to - especially knowing that the US Dollar is shrinking on a day to day bases - perhaps even more so, in the future, as the debt ceiling was just raised in what has to be the most idiotic display of politics that has come out of the US in the longest time. Based upon that, the dollar is likely to shrink even further!

I grant you that data entry will finally be correct under eFiling because it is the people like me who have to do that data entry and not the IRS, which seems, never having ever gotten its data entry capabilities correct - but I'm the curmudgeon who refuses to do it - this is and should only be the IRS's job, not the tax practitioner's job!!! Hey, maybe this is a good area for 'jobs creation'!!?

Truly, when you get down to it, there is, in essence, one reason why my clients will sign whatever letter I give them to sign: because I will not do their tax return, otherwise. If my clients truly want to eFile, they can - let them go to another tax preparer!

O.K. enough about the IRS - let's get to China!

Let's talk about tax incentives. In this day and age of choosing where to locate either a new business or expansion of an already successful business, the businessmen/women behind the venture realise that they make their profits in cutting costs, far more than from increasing sales.

Tax has obviously got to be one of the primary - if not the primary factor - in making an investment location decision.

Location in India has come from the private sector, as the SEZs are all private industrial endeavors. I like the concept of privately developed SEZs but the realities of abuse have made me skeptical of their overall benefit. On the other hand, Chinese SEZs are all government created. Some were abject failures. Some were veritable gold mines for business development.

There were initially seven zones, incepted during the 1980s, but never really given their jump start until Deng Xiao Peng visited Shenzhen during his famous 'Southern tour' which happened at just about the same time as India's elimination of the 'License Raj'. In both cases, the impact upon business was 'revolutionary'! I was living in Shenzhen at the time of Deng's speech. Obviously, I could neither read the newspapers nor understand the initial television commentary but within a couple of days, the full impact of what Deng said was translated and I saw, from the start, what the past twenty years of growth have meant.

Yet it is not just the SEZs, anymore but designated regions, far, far away from the coast, into the 'hinterlands' of China, described within the goals in its 12th Five Year Plan as the locations in the countryside where 100 million people will emigrate to over a couple of generations, as the move towards planned urbanization continues in the future. Yes, setting up new cities from nothing to vast metropolis's is a Chinese 'specialty': I was in Shenzhen when the population was a bit over 300,000. 14 million reside there, now. I remember looking at the swamplands across from Shanghai's Bund - Pudong is there, now.

Saturday, 6 August South China Morning Post reports that the central government has decided to extend for another ten years a policy that allows most enterprises in western regions to enjoy big corporate income tax reductions. The Ministry of Finance, General Administration of Customs and the State Administration of Taxation, in a joint declaration, stated that they would keep a 15 percent corporation tax rate (compared to the 'normal', 25 percent rate) for industries and in locations where development is wanted. A dozen provinces and designated regions - including municipalities - are participating in this program. These are landlocked locations, including Xinjiang, Tibet, Inner Mongolia, Guangxi and Ningxia. Minority areas. Areas where natural resources waiting to be 'developed' are very, very abundant. Areas where there are ethnic conflicts, unfortunately, too. Hence, projects where relatively 'non-exploitation' (these are my words, by no means, the governments!!), employment which will economically benefit communities are going to get a very receptive welcome to develop. There will definitely be competition between regions for business, so it definitely appears to be a shopper's market, looking for additional tax incentives, as well - including VAT rebates.

If you've got the capability to expand in China, go west, where you're going to be locked into a very nice 15 percent corporate tax rate for the next decade!

But wait - it is not just way out west ....

Have you ever heard of Hengqin Island? No? You haven't?? Well, then, how about Macao? Oh yes, I'm sure that you've heard of the place - this is gaming Mecca for China, a country with a gambling culture, if ever there was one. If you look out from the any of the gaming resorts on the Cotai strip of Macao, looking towards the sea, you'll find that 106 square kilometer , virtually undeveloped island. It is closer to Macao than to Zhuhai, under who's political domain it resides in, and it is going to be developed, not by Zhuhai, not by Macao but through the powers that be, coming from Guangzhou. Political 'lobbies' exist in every jurisdiction - just within the cultural 'rules'. Believe me, there is a very low-key but very, very influential Guangdong lobby in Beijing and they have got a 'really nice deal' with Hengqin!

I learned practical theory and basic functions of hedge funds in the 1960s (yes, I am that old!) when I worked in the garment industry, in Los Angeles. Our firm had its resident bookie, who quoted both east coast and west coast football game odds. I simply straddled the bets - playing odds differences against one another. If that wasn't hedge fund practice, then I do not know what is.

Hedge funds are welcome on Hengqin Island - lots of things are! Both Hengqin and Nansha in south Guangdong Province as well as Qianhai in Shenzhen were designated, specifically, within the 12th Five Year Plan (2011 - 2015) as 'testing grounds' for next generation of free trade zone concepts - concepts not simply for manufacture, as the service industry develops sophistication.

Three new zones within zones within one province: Guangdong. It makes one wonder about the 'leverage' that the heavyweights of my home province were able to utilize in getting this written into the five year plan! Qianhai, by the way, was 'forced' to step aside from this role - apparently due to Hong Kong pressure - but neither Nansha nor Hengqin succumbed to this pressure.

All goods shipped to Hengqin will be exempted from import duties unless or until they are transported to the rest of either Zhuhai or the mainland. All incoming goods will be exempt from VAT and consumption taxes. Virtually all business entities located on Hengqin will be eligible for the 15 percent corporate tax.

Import duties will still be applicable for materials necessary for commercial real estate projects. Once manufacture has been approved for sale to the mainland, both value added and consumption taxes will also be payable.

The University of Macao will be re-locating to Hengqin Island, which will include residential development and shopping malls, in essence, a self-contained, 106 square kilometer city, albeit, one with tax incentives for development of financial services, research and development, cultural innovation, expansion of traditional medicine, etc. You get the picture ...

Hengqin's policies are similar to those of the 15 other free trade/economic zones, state owned and controlled, since the 1990s. For an international entity wishing to enter the Chinese market, this looks very, very interesting.

It will be interesting to see how this one develops ....!