Government and Policy

Higher tax threshold to assist poor on way

By Li Woke (China Daily)
Updated: 2011-02-28 07:33

BEIJING - China will raise the threshold of personal income tax amid the rising cost of living, a move aimed at reducing the burden of middle and low-income people and expanding domestic consumption, Premier Wen Jiabao said on Sunday.

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"The threshold raise will be discussed by the State Council on Wednesday and will be delivered to the National People's Congress later for review," Wen said in Beijing during his online chat organized by the official website of the Chinese central government and the website of Xinhua News Agency.

Wen's online session was held before the upcoming annual session of the National People's Congress, the country's top legislature, which is scheduled to begin this week.

China started to collect individual income tax in 1980 for monthly incomes more than 800 yuan ($122) when the average urban income was around 40 yuan per month. In 2008, the tax starting point increased to 2,000 yuan when residents' income in urban areas jumped to an average of 1,315 yuan per month.

Reforming the income tax has become one of the main concerns of the public in recent years amid rising inflation.

A survey by People's Daily and its website in January showed 65.9 percent of people surveyed called for a higher threshold of personal income tax, while 55 percent said higher taxes should be imposed on rich people.

Last year, China's consumer price index rose 3.3 percent, mainly driven by rising food prices. Together with rocketing housing prices in many regions, middle and low-income earners have been under huge pressures.

At the same time, the country collected 483.72 billion yuan in personal income tax last year, 22.5 percent higher year-on-year.

People have been concerned about taxes and also the rising cost of housing, which have both hit them in the pocketbook.

The government has introduced a series of policies to discourage property speculation and curb excessive price rises since the end of 2008, including higher down payments, higher lending rates, purchase limits and more housing supply.

"The tax reform, curbing property speculation and building low-income houses are part of the government's moves to ease the growing gap between rich and poor and improve people's livelihoods," said Li Weiguang, a professor at Tianjin University of Finance and Economics.