Thu, June 30, 2011
Business > Economy > China revises individual income tax law

Chinese expect more from income tax amendment

2011-04-25 08:27:00 GMT2011-04-25 16:27:00(Beijing Time)  Xinhua English

BEIJING, April 25 (Xinhua) -- 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 country's legislators.

The Standing Committee of the National People's Congress (NPC), China's top legislature, reviewed a draft amendment to the Personal Income Tax Law during a three-day bimonthly session that ended Friday, in a move to narrow the income gap and offset the effect of rising living costs.

The draft increases the minimum threshold for personal income tax from 2,000 yuan (307 U.S. dollars) per month to 3,000 yuan, and cuts the number of income tax brackets from nine to seven.

The draft amendment, which was submitted to the session for the first time, did not receive approval after lawmakers put forward suggestions, and also many urban citizens called for larger cuts in their tax burden.

Wu Bangguo, chairman of the NPC Standing Committee, said the amendment would be made public to solicit feedback and be put to a vote at the top legislature as soon as possible after it undergoes further revisions based upon public opinion.

A survey of 282,000 Internet users conducted by ifeng.com showed 98.1 percent supported lifting the threshold, as they believe the tax burden for low- and middle-income earners are both heavy and unreasonable.

"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 unacceptable and suggested it be increased to 5,000 yuan.

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, as food prices surged 11 percent year on year.

Cai Yingtong, who works at a multinational company in Shanghai, said the proposed threshold increase might mean more to people in other less developed regions, but could be unsuitable in Shanghai, the country's financial and business center.

The 26-year-old earns a pre-tax monthly salary of 14,000 yuan, an income likely envied by many at his same age in most other parts of the country.

He now pays 700 yuan in personal income tax per month, more than half of his rent. "If the tax can be adjusted, I'll certainly have more money in my hands," he said.

But he pays a rent of 1,300 yuan and spends 2,000 to 3,000 yuan on other living expenses each month. In addition, he faces huge economic burdens, as he plans to buy an apartment in the city where housing prices average over 23,000 yuan per square meter.

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.

China began to collect personal income taxes in 1980 with a threshold of 800 yuan, about 20 times the average income for urban workers. This threshold doubled in 2006 and raised again in 2008 to 2000 yuan.

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