NPC: Income tax to be levied from 1,600 yuan
(chinadaily.com.cn)
Updated: 2005-10-23 09:59

China's central authorities set to ease the tax burden on the low- and middle-income residents, in a specific move to improve the well-being of the ordinary wage-earners.

China looks set to ease the tax burden on its low- and middle-income residents after holding a landmark public consultation amid fears that a growing wealth gap could hurt stability. [AFP/File]

A revised law to raise the income tax threshold from 800 to 1,600 yuan (100 to 200 dollors) a month is expected to be approved by the Standing Committee of the National People’s Congress (NPC) this week.

The new threshold was raised slightly from 1,500 yuan in a previous draft of the law to 1,600 yuan after the NPC Standing Committee , the top legislature, held a widely-reported public consultation session in Beijing on the law in September.

Analysts said the new law could aid the blue-collar workers and the farmers, and will serve the leadership’s belief to build up a harmonious society. It has been listed as a prime job at the ruling Chinese Communist Party Central Committee’s Fifth plenum early October to shoot a growing wealth gap in China.

"After fully considering the public opinion from the hearing, the draft amendment of the tax law ... lifted the personal income tax cutoff point from 1,500 yuan to 1,600 yuan," the official Xinhua news agency said Saturday.

Wage earners, officials and experts drafting the law, trade unions representatives and delegates of poor provinces' tax authorities were invited to the September hearing in Beijing, the first public consultation for a law.

They debated, they differed and dug deep for a solution: How can personal income tax be levied to benefit as many as possible while at the same time ensuring State coffers do not suffer too much? The two main concerns were: what should be the income threshold to pay taxes and whether there should be a unified tax rate across the country.

Whatever the eventual outcome for Chinese earners, foreigners - who pay income tax only if their monthly income exceeds 4,000 yuan (495 dollars) - would not be affected by the new law.

During the hearing, the first of its kind, 17 of the 20 speakers - including civil servants, academics and migrant workers - chosen from more than 5,000 applicants, favored raising the starting line to 1,500 yuan or higher, with some suggesting 3,000 yuan (375 dollars).

The 800-yuan threshold was set in 1993, when only 1 per cent of citizens earned more than 800 yuan per month, but in 2002, the income of 52 per cent of people exceeded that.

Chinese pay income tax on a sliding scale starting with 5 per cent for those earning above 800 yuan with a maximum of 45 per cent for those making more than 100,000 yuan a month.

Shi Yaobin, head of the Taxation Department of the Ministry of Finance, said that the State would lose 20 billion yuan (2.5 billion dollars) a year in revenue if the threshold were raised to 1,500 yuan.