Move to improve tax rule means business

Updated: 2011-03-15 07:53

By Hu Yinan and Cao Li (China Daily)

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Move to improve tax rule means business
Workers could put a little more pay in their pockets if proposals to reduce individual income tax are adopted. The tax starting point is expected to rise from 2,000 yuan a month in wages to at least 3,000. These migrant workers were collecting their pay at a construction site in Jiyuan, Henan province. [Miao Qiunao / for China Daily]

Move to improve tax rule means business


Those on low and middle incomes to benefit, report Hu Yinan and Cao Li in Beijing.

In the second straight year of heated discussions on raising the threshold for individual income tax, national legislators and political advisers this time appeared to mean business.

The State Council, China's Cabinet, on March 2 approved in principle a proposal to reduce the tax burden on medium- and low-income earners. Five days later, Vice-Finance Minister Li Yong said it was "beyond doubt" that the proposed adjustments would eventually go through.

Amendments to the individual income tax law are expected to be submitted next month to the Standing Committee of the National People's Congress (NPC), the top legislature. If all goes smoothly, the revised law could take effect later this year.

The amendments "will be the first practical thing" the administration will do for the people this year, Premier Wen Jiabao told a taxi driver in a Web chat with netizens just before the annual sessions of the NPC and the Chinese People's Political Consultative Conference (CPPCC), the top political advisory body. "The entire medium- and low-income wage-earning strata will benefit from this measure."

Wen said earlier that revisions in individual income tax were "priority No 1" in a much broader drive to tackle ever-widening income disparities in the next five years. The government reaffirmed last week that it would "firmly adhere to the path of common prosperity, so that all citizens can enjoy the achievements of the reform".

Details of the draft law have not been made public, but it is widely believed that the number of income tax brackets will be reduced from nine to six and that the tax starting point will be raised to earnings of 3,000 yuan ($456) a month, up from the current 2,000. Officials, experts and the public all agree 2,000 yuan is too low a threshold.

Earlier this month, about 57 percent of respondents in an online survey by the popular Internet portal said they want to increase the entry mark to 5,000 yuan a month or more.

NPC deputy Fang Qing, who is a primary school headmaster in Jinhua, Zhejiang province, agrees. "A teacher (in Jinhua), for example, earns 3,000 yuan a month. There's not much left after taking out the rent and basic living costs. If, say, they were to hire a babysitter to assist in raising a child, that's an additional 2,000 yuan.

"It would be too much of a burden if the teacher were asked to pay individual income tax on top of all that," he said. "The 3,000 yuan mark is still too low for people in Jinhua. Around 5,000 yuan would be a more or less reasonable level."

Other legislators feel the same way. On Thursday, a joint proposal to boost the income tax entry to 5,000 yuan was submitted to the Chinese parliament by 35 deputies, including Li Dongsheng, chairman of electronics giant TCL.

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