Bill seeks to ease the tax burden of lowly paid

PUBLISHED : Thursday, 21 April, 2011, 12:00am
UPDATED : Thursday, 21 April, 2011, 12:00am


Legislators yesterday started to review a draft amendment that would raise the threshold for taxable income from 2,000 yuan (HK$2,370) to 3,000 yuan a month.

Premier Wen Jiabao pledged to lift the personal tax threshold earlier this year to appease low-income earners at a time of rising inflation.

While it may take more than one review for the National People's Congress Standing Committee to approve the amendment, people are already complaining that the planned raising of the threshold is still too small.

A survey showed 88 per cent of respondents hoped the threshold would be raised to at least 5,000 yuan.
Xue Honglin, who works at an information technology company in Beijing, said even a 5,000-yuan threshold was too low, 'making it hard for people to survive, as they make so little in a city where everything is so expensive'.

In his explanation to the Standing Committee, Minister of Finance Xie Xuren said the 3,000-yuan threshold was reasonable.

Official data showed that an average urban worker's monthly expenditure was about 2,384 yuan, Xinhua reported.

By raising the threshold from 2,000 yuan to 3,000, Xie said, only about 12 per cent of workers would have to pay income tax, compared with 28 per cent now.

In the draft amendment, the existing nine tax brackets are to be streamlined into seven, by enlarging the 5 per cent and 10 per cent brackets to make low-paid workers pay less, and merging the 40 per cent and 45 per cent brackets to make high-paid workers pay more.

While residents welcome any changes to make them pay less, some doubt what benefit the new law can bring by making high earners, who are most likely highly educated professionals working in offices and laboratories, surrender almost half of their income to the government.

Li Xudong, a senior researcher with Guangdong's finance department, said the right approach to tax reform should be 'broadening the tax base while lowering the tax rates'.

Wang Weiqing, a tax specialist at Shanghai Jiao Tong University, said other wealthy people would hardly be affected because they got their money through assets-based transactions.

Wu Ming, a marketing manager in Beijing, said the government should tax the nouveau riche more.

He also said government employees should be subjected to more tax 'because they do nothing while earning too much with various subsidies and grey [illegal] income, especially those in the justice and law enforcement departments'.

Overall, by narrowing the total tax base, the proposed changes would mean a loss of 120 billion yuan a year in government revenue, according to official media.

There are also minor changes in the draft amendment regarding the personal income tax imposed on self-employed people in industry and commerce, which are likely to make small-businesspeople's lives somewhat easier, according to Liu Yi, a Peking University professor of economics.

China has amended its personal income tax twice, raising the threshold from 800 yuan a month to 1,600 yuan in January 2006, and then raising it again to 2,000 yuan in 2008.

Additional reporting by Laura Zhou