Taxes form east to pay for rural social programs
(agencies)
Updated: 2005-03-10 02:24

China will use taxes from its fast-growing eastern cities to help pay for rural social programs as it tries to close a widening divide between rich and poor, senior officials said Wednesday.

Communist Party leaders have ordered an end to farm taxes and promised more money for construction, education and health care in the neglected countryside in an effort to ease poverty.

Asked how the government would pay for its initiatives, the country's top finance and tax officials said 20 percent of the money would come from taxes on prosperous coastal areas and the rest from China's central treasury.

``Taxes will be used as a tool to play a very important role in building a harmonious society,'' Xie Xuren, director of the State Tax Administration, said at a news conference during the annual meeting of China's parliament.

Government support for rural social services and education have fallen over the past 20 years as China shifted from a planned economy toward a capitalist-style market.

By ending farm taxes, the government hopes to boost rural incomes and eliminate a major cause of tension in the countryside.

Xie said the government was also considering changing income tax for the small fraction of the Chinese work force that pays it. He did not give details.

Overall, China's planners are struggling to make the tax system fit the realities of its fast-changing economy.

Beijing has announced a new set of financial incentives to channel financial support to areas that increase tax revenues or produce more grain, said Finance Minister Jin Renqing.

Changes in the tax system will also be used to encourage re-employment of laid-off workers and to beef up the country's social security system, Xie said.

To conserve farmland and encourage conservation, the government is also considering a fuel tax and adjustments to land taxes.

``All these methods will be combined to ensure man and nature in harmony,'' he said.