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BEIJING - Taxation officials will be keeping a close watch on high earners to ensure they pay the proper amount of tax in an effort to rein in the ever-widening income gap, the country's top taxation authority said on Wednesday.

The State Administration of Taxation urged local officers to pay special attention to the personal income tax due on the transfer of property, trades of stocks and shares, and private company deals, according to a notice released on the administration's website.

The notice clearly states that foreigners in China are also subject to personal income tax.

Local taxation authorities are also asked to investigate the sources of income of those who are well off and to compile a database of their findings.

It is necessary to improve the regulations and procedures for those who make an annual income of more than 120,000 yuan ($17,600), the administration stressed.

To do so, the individual income tax information system must be applied nationwide.

The administration said the move is in response to the growing income gap and to use taxation as a factor in adjusting the currently imperfect system of income distribution.

Yue Jinglun, a sociology professor at Sun Yat-sen University in Guangdong province, said not all of the measures mentioned in the notice are new, though they have not been well implemented before due to a series of complicated reasons.

"However, it is now the right time to improve the income distribution system through the improvement of the tax collection process. We need to lift the income level of those who earn a relatively poor salary," he said.

"The whole taxation system should be overhauled at a certain level, since the current one hardly takes the diverse situations of every individual citizen into account. A more specifically designed system is badly needed," Yue added.

Tang Jun, a social policy researcher with the Chinese Academy of Social Sciences, said he observed that the notice also underlines the taxes levied on the sale of real properties and dividends.

"It is necessary to impose heavy taxes on these virtual economic sectors. The measure can be seen as an effective tool for curbing the speculation drive," he said.

He also suggested the introduction of a real-name assets account system in the country to drastically reduce income tax evasion.

CHINA DAILY

(China Daily 06/10/2010 page5)

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