Law spares 60m from income tax
The mainland's new personal income tax law, which takes effect today, exempts 60 million people from paying the tax.
The new rules, passed on July 27 by the Standing Committee of the National People's Congress, raise the threshold for taxable personal income from 2,000 yuan (HK$2,440) per month to 3,500 yuan, after the worker's contribution to social security insurance.
The Beijing Youth Daily hailed that 2.29 million workers in Beijing would no longer have to pay a monthly personal income tax. A further 2.01 million workers would have to pay less. And an additional 300,000 self-employed workers would be taxed 40 per cent less than before.
In Guangdong, the province that handles the most investment and export business from Hong Kong, the local taxation authorities said seven million workers would be exempt from their tax burden, resulting in a reduction of 13.4 billion yuan a year in government revenue.
The new tax rules would relieve about 60 million workers of the burden of paying personal income tax, Wang Jianfan, a tax official at the Ministry of Finance, was quoted as saying by the International Finance News, which is owned by the official People's Daily. The government would collect 160 billion yuan less a year, he said.
This means that across the mainland, the number of workers who still have to pay personal income tax will drop from 84 million to 24 million.
Earlier this year, Premier Wen Jiabao said the government's intention to raise the personal income tax threshold was to help low-income citizens during a time of rising inflation.
However, according to He Zhenyi, a researcher with the Chinese Academy of Social Sciences' economics institute, reducing society's personal income tax burden cannot be a very effective way to help the poor fend off inflation.
It is the lowest-paid workers whose livelihoods are the most seriously affected by inflation. They could be making much less than 3,500 yuan a month, so raising the tax threshold would be of zero benefit to them, he said.
He called for a thorough reform of the existing tax system to narrow the rich-poor gap effectively.
125 yuan
The monthly savings the new law will mean for a worker who earns 3,500 yuan a month. A person on a 10,000 yuan salary will save 480 yuan
