Rise in income tax exemption threshold ruled out by official

Finance Minister Lou Jiwei ruled out on Monday the possibility of raising the monthly income tax exemption threshold.

He said the government instead is considering adopting various exemption standards based on individual financial burdens.

Lou made the remarks at the annual legislative session when answering a question on whether the monthly tax exemption threshold should be raised to 5,000 yuan ($768).

The threshold has remained unchanged since being raised in 2011 from 2,000 yuan to 3,500 yuan, as the Chinese economy has seen continuous inflation during this time.

According to Lou: "The threshold in essence is a unified deduction. Simply indiscriminately raising the amount deducted is not fair. If a person earns 5,000 yuan a month, he alone can live a good life. But if he has a child to raise, it will be much harder."

The income tax regime Lou envisions is based on an individual's gross income, while making deductions according to financial burdens.

The current system taxes 11 types of income separately, imposing different exemption thresholds and tax rates for different incomes.

When the reform is completed, most of the 11 income types will be considered. Some spending, such as that on education, children's schooling and care for seniors, would be included as deductions for a range of incomes.

Lou gave three examples of possible deductible items－spending on re-education for career purposes, spending on raising children, and mortgage interest payments for a first property.

Mortgage interest, instead of mortgages, as a deduction would be a disappointment for many mortgage payers, as the latter is much higher than the former.

Even mortgage interest as a deduction has not been included in the reform draft the Finance Ministry submitted to the State Council.