Sun, December 14, 2008
Business > Economy

Experts: personal income tax cut unlikely to stimulate consumption

2008-12-14 12:46:55 GMT2008-12-14 20:46:55 (Beijing Time)  Xinhua English

BEIJING, Dec. 14 (Xinhua) -- To raise the income tax exemption bracket to anyone making 3,000 yuan (438.4 U.S. dollars) a month, would not boost domestic demand and consumption.

This remark was made on Saturday by Ni Hongri, researcher at the development research center of the State Council, and Gao Peiyong, vice director of the institute of Finance and Trade Economics of the Chinese Academy of Social Sciences.

They were responding to structural tax cuts proposed at an economic conference which ended here Dec. 10. The proposal has been widely debated in the media.

Currently, China's threshold for paying income tax stands at 2,000 yuan a month.

Gao said the proposed cut was targeted at a "specific kind of tax from a specific group of people for a specific purpose". He does not think it would stimulate consumption in an effective way.

Ni said 60 percent of Chinese people have a monthly income of less than 3,000 yuan. The higher threshold would impact middle income families, however, the ratio of marginal propensity to consume (MPC) is low, he added.

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