The plan, if implemented, would be 'the most direct and easiest way to benefit the low- and middle-income working class, be it a worker or a cadre. This is the first favourable deed of the year for residents,' Wen said.

Mainland residents start paying income tax at 2,000 yuan (HK$2,400) a month. The figure was raised from 1,600 yuan a month in March 2008. Academics have been calling for a rise in the threshold in recent years, saying it would help ease the burden on middle- and low-income earners as consumer prices continue to rise.

The mainland's consumer price index, a major gauge of inflation, rose 4.9 per cent in January year on year, as food prices increased 10.3 per cent because of rising demand and a drought in key grain-growing regions. The CPI rose 5.1 per cent in November, a 28-month high, and 4.6 per cent in December. Analysts say low- and middle-income families were hit hardest during the latest round of inflation because food accounts for a bigger part of their living expenses. According to Xinhua, the State Council submitted a report to the NPC on the widening wealth gap, saying the present individual income tax system fails to factor in the number of people each taxpayer has to support.

Wen said ensuring a fair distribution of income was an important task for the government in the coming five years.

'Income distribution has a direct bearing on social justice and stability,' he said.

'We will ensure that people's incomes increase to keep pace with economic growth and that the growth of people's salaries keeps pace with the rise in productivity.'

The premier said the central government would tackle the problem by increasing minimum living allowances and the salaries of low-income earners; by restricting earnings in industries with overly high incomes; and by protecting lawful wages and regulating excessively high salary packages.