China tax cut finalised but leaves many unimpressed
Modest changes allow for some growth in incomes and help with cost of living, but wage earners wanted more
China’s legislature approved on Friday a modest cut in individual taxes which has left many wage earners unimpressed.
The final bill approved by the Standing Committee of the National People’s Congress increases individual taxpayers’ annual tax-free threshold to 60,000 yuan (5,000 yuan per month) from the previous 3,500 yuan per month, expands the income range for the lower tax brackets, and adds new tax deductions, including one for parental elderly care, on top of the existing deduction for social insurance payments.
The final bill is little changed from the first draft unveiled in June, with seven tax brackets and a top income tax rate of 45 per cent. The 5,000 yuan per month tax-free threshold was left in place from the first draft despite many demands for it to be raised further.
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Cheng Lihua, vice finance minister, said the taxable income threshold was arrived at after careful calculations based on average spending and consumer prices data.
The 5,000 yuan threshold will lower the percentage of the urban labour force paying any income tax from the current 44 per cent to 15 per cent, Cheng said.
The new threshold is high enough to ensure that urban residents will be able to afford average monthly expenses before their income is subject to tax, she told a press conference in Beijing following the final vote on the bill.
