Income-tax threshold raised to 1,600 yuan
(chinadaily.com.cn/China Daily)
Updated: 2005-10-27 15:59

China's top legislators adopted Thursday, October 27, a revised Personal Income Tax Law, raising the threshold for monthly personal income tax from 800 yuan (about US$100) to 1,600 yuan (US$198), a move that will help ease tax burdens on wage earners and create a more equitable society.

A man walks past a sign advocating people to file tax returns in Shanghai in this undated photo. China's legislature adopted the revised personal income tax law, raising the threshold for tax payment to 1,600 yuan. [newsphoto]

The amendment will become effective next year.

The Standing Committee of the 10th National People's Congress (NPC) also approved the amendments to the Securities Law and the Company Law.

"It will ease the burden on low- and middle-income people, mainly wage-earners such as migrant workers and employees at enterprises," Han Baojiang, economics professor of the Central Party School of the Communist Party of China, said in an interview with China Daily on Sunday, October 23.

The central authorities have started to use taxation as a tool to achieve the goal of building a "harmonious society," said Han.

This is only the first step, he said, more measures will follow, such as the adoption of an inheritance tax.

The new threshold was raised from 1,500 yuan (US$185) in a previous draft of the law revision after the country's top legislature held the first-ever public hearing in Beijing last month.

A total of 20 representatives from all walks of life voiced their views and gave their proposals, with most agreeing that the cut-off point should be raised. The move was widely hailed as a good example of heeding public opinion while formulating legislation.

Top lawmakers, while deliberating and adopting the income tax law amendment, accepted their proposals, setting the deduction level at 1,600 yuan. 

In 1994, China began levying income tax on citizens earning more than 800 yuan (about US$100) but only 1 per cent of people were earning more than that; now, about 60 per cent earn that much.

The increased threshold will not have a bearing on foreigners working in China as they pocket 4,000 yuan (US$495) tax-free each month.

But many foreign businessmen and enterprises are likely watching with interest as most of their employees are Chinese. In addition, procedures for tax deduction by companies at source would be greatly simplified.

He Yongjian, an official with the Legislative Affairs Commission under the NPC Standing Committee, said that the State could afford the raised threshold; and efforts to collect tax from high-income groups would be intensified.

The State coffers may lose 20 billion yuan (US$2.5 billion) a year with the implementation of the new policy, Shi Yaobin, head of the Taxation Department of the Ministry of Finance, said earlier.