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Millions may become tax-filing delinquents

By Zhang Fengming (Shanghai Daily)
Updated: 2007-03-30 17:01

With China's deadline for filing personal income tax returns only a few days away, some financial experts suggest the state has received less than 20 percent of the returns it is expecting.

This is the first year the State Administration of Taxation is requiring high-income earners - those whose annual incomes are more than 120,000 yuan (US$15,530) - to file personal income statements. The deadline is Monday.

The tax department said it had received only 1.18 million as of the past Monday.

The director of SAT's press office, Niu Xinwen, told Xinhua that the number of expected income tax returns is a secret.

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But a professor of finance at People's University told theShanghaiMorning Post that there are likely six to seven million people who earned more than 120,000 yuan last year on China's mainland.

TheBeijingLocal Taxation Bureau says there are 350,000 people in the capital alone who earn more than 120,000 yuan a year.

There was no figure available yesterday for the number of Shanghai tax filers.

An Tifu, a retired professor of finance at People's University, predicted that only 20 percent of those who are required to file income tax returns will have done so by the deadline.

An unnamed official with the state tax office warned that those who fail to declare their incomes will face fines of 2,000 to 10,000 yuan. People who falsely report their incomes can be fined up to 50,000 yuan. Penalties for evading taxes can equal five times the amount of unpaid tax and a jail term.

China's personal-income levels comprise 11 categories, and rates range from five percent to 45 percent. Income derived from manuscripts, interest or dividends is subject to a fixed 20 percent rate.

The new requirement to report annual income will ensure that those who earn the most pay the most and will help narrow the gap between rich and poor, authorities said.

But some question whether the penalties will ensure compliance and whether the procedures are too cumbersome for all taxpayers to follow.

"The follow-up measures from the tax authority will be very important," said Alfred Shum, a partner in the Shanghai office of the accounting firm Ernst & Young. "People will pay more attention to the filing if punishments are handed out for late filing or intentional tax avoidance."

Gu Zhenfei, a 26-year white-collar worker who earned 160,000 yuan last year at a local law firm, complained about the lack of information about proper filing procedures.

"The tax filing was so complicated that I don't know whether I did it correctly," Gu said. "No one educated us on how to file the report."

China's individual income tax revenue increased 17.1 percent last year to 245.2 billion yuan - even after more than 20 million people were exempted when the monthly salary threshold was doubled to 1,600 yuan.