Economy

Ministry stands firm on minimum taxation threshold

By Zhao Yinan (China Daily)
Updated: 2011-06-28 13:32

BEIJING - The Ministry of Finance seems determined to stick with its proposed personal income tax threshold, despite repeated calls from the public to raise the minimum level and reduce the tax burden amid rising prices.

Hong Hu, deputy director of the Legislative Affairs Commission under the National People's Congress, told lawmakers that the second draft of the tax legislation recommends keeping the threshold at 3,000 yuan ($463), while cutting the lowest tax rate from 5 percent to 3 percent.

By slashing the entry-level tax rate by two percentage points, Hong said more than 70 percent of salary earners will benefit.

According to the current regulation, individuals whose monthly income is lower than 2,000 yuan are not required to pay income tax.

The rest will see taxes levied in line with nine progressive tax brackets.

Related readings:  China to amend individual income tax law  Income tax threshold kept at 3,000 yuan  Govt gets earful of tax suggestions  Chinese debate income tax exemption plan

The contentious proposal sparked a record 240,000 responses from about 83,000 people.

Only 15 percent of respondents approved of the changes, while most disagreed and proposed raising the threshold to at least 5,000 yuan to tackle the widening wealth gap and increasing prices.

China's consumer price index increased by 5.5 percent year-on-year in May - a three-year high - exerting heavy pressure on low-income families, according to the National Bureau of Statistics.

Zhu Yongxin, a member of the NPC Standing Committee and a renowned educationist, criticized the proposed draft, saying it has failed to heed public opinion.

An observer representative from Hong Kong, Lau Pui-king, compared the mainland's taxation system with that in the special administrative region, saying the government has to consider the burden of excise tax, which is included in the price, to balance the country's revenue and people's purchasing power.

"Many mainland consumers are not even aware that they have to pay excise taxes, which is a major tax category of the country as well as a grave burden of salary earners. To impose heavy income tax, adding to the already burdensome consumer tax, may hurt domestic demand," she said.

Lawmakers also urged the government not only to focus on the threshold, but make comprehensive changes on the structure of the tax, as well as pushing forward the reform of the country's taxation system.

"It is unreasonable to levy a sole bread-earner who earns 5,000 yuan per month, but to protect a bachelor who makes 3,000 yuan a month," Li Lianning, member and deputy secretary-general of the NPC Standing Committee, said in a group discussion.

"It is important to consider various factors when collecting taxes, such as the salary earner's loans, insurance, children's education and others."

"But the reform of the taxation system, which was first brought out in 1996, has seen little progress over the past 15 years," he said.