State Council to consider tax plan to help less well-off working classes

The State Council will discuss on Wednesday changes to the nation's system for income tax deductions designed to help medium- and low-income individuals, Premier Wen Jiabao said yesterday.

In response to a question from someone claiming to be a taxi driver during an online interview with the public, Wen said the government would raise the threshold of individual income tax.

After Wednesday's cabinet discussion, the plan will be sent to the National People's Congress for review. The NPC's annual session is set to start on Saturday.

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.