China's NPC to reconsider personal income tax law

14:50, April 25, 2011      

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Receptive to a majority wage-earners' voice for lowering taxes on their salaries, China's National People's Congress Standing Committee, the top legislature, has decided to give more time to deliberate and vote on a draft law on personal income levy.

The State Council, headed by Premier Wen Jiabao, proposed in early April an amendment to the current law on personal income taxation. The draft would increase the minimum threshold for taxable income from 2,000 yuan to 3,000 yuan per months, and reduces the number of income tax brackets from nine to seven.

The amendment is meant to levy less on the low- and middle-income earners, enabling them to combat with rising inflation. It also aims at raising the tax rates on persons making more than 20,000 per months, a move to narrow the gap of low- and high- incomes in China.

However, a majority of Chinese people have asked for raising the threshold for taxable incomes, as rising inflation and high housing prices erode incomes and add to living costs. Residents in large Chinese cities hope to see larger cuts in personal income tax than being considered by the top law-makers.

"The Standing Committee of the National People's Congress reviewed a draft amendment to the Personal Income Tax Law during a 3-day bimonthly session that ended Friday in Beijing," but it did not bring the draft to a vote, said a Xinhua News Agency report.

The draft amendment, which was submitted to the session for the first time, did not receive approval after lawmakers put forward many suggestions.
Wu Bangguo, chairman of the NPC Standing Committee, said the amendment would be made public to solicit feedback from the public, and the draft will be put to a vote as soon as possible after it undergoes further revisions based upon public opinion, the Xinhua report said.

A survey of 282,000 Internet users showed more than 90 percent per cent supported lifting the threshold to 4,000 yuan or even 5,000 yuan , as they believe the tax burden for low- and middle-income earners are heavy.

"The urban living costs are rising fast," said Ding Li, a resident in Guangzhou, capital of south China's manufacturing hub of Guangdong. "Raising the threshold can directly cut the burden of average citizens."

About 85.6 percent of the respondents, however, said the 3,000-yuan threshold was "too low" and suggested it be increased to 5,000 yuan per month.

Many other people even said the threshold should track consumer inflation rises and be raised to match local housing prices. China's consumer price index (CPI), a main gauge of inflation, rose 5.4 percent in March from one year ago, a 32-month high.

The amendment was hailed by many as a step forward in the country's personal income tax reform as, for the first time, it attempts to adjust the tax rates.

According to the draft, the minimum tax rate of 5 percent will be applied to those whose monthly salaries range from 3,000 to 4,500 yuan, compared to the current 2,000 to 2,500 yuan. Also, the peak rate of 45 percent will apply to those who make more than 80,000 yuan per month, instead of the current 102,000 yuan.

For white collar workers, the government should further reduce taxes in a bid to expand the middle class group, said Guo Shiping, a researcher at the School of Economics at Shenzhen University.

China's total tax revenue surged 22.6 percent in 2010 and soared 32.4 percent in the first quarter of 2011, two or three times the gross domestic product growth.The amendment is estimated to cut the country's personal income tax revenue by about 120 billion yuan, said Finance Minister Xie Xuren.

Personal income taxes totaled 484 billion yuan in 2010, accounting for 6.6 percent of the country's total tax revenues.

People's Daily Online / Xinhua
 
 
     
 
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