Legislators have proposed raising the threshold for personal
income taxes to 3,000 yuan ($410) to benefit low- and medium-income
earners struggling to deal with recent increases in the prices of
daily necessities.
A draft amendment to the Law on Individual Income Tax that is
now being deliberated by the National People's Congress (NPC)
Standing Committee would free those earning less than 2,000 yuan a
month from paying income tax. The current level is 1,600 yuan.
But Nan Zhenzhong, a NPC Standing Committee member, said a
400-yuan increase would not be enough to ease the cost burden on
urban residents, who have struggled to adapt to inflation.
"The public will be happier if the increase margin is bigger,"
he said.
Another member, Ren Keli, proposed setting the limit at 3,000
yuan to further benefit the public and to avoid the need to revisit
the issue.
The consumer price index (CPI) climbed to 6.9 percent in
November, the fourth consecutive month that the CPI had been above
6 percent.
The Ministry of Finance estimates that the basic cost of living
each month - including food, clothing, accommodation and transport
- of an average urban salary earner this year is 1,586 yuan. That
amount is likely to climb to 1,745 yuan a month next year.
Ren said that if prices continue to rise, that figure could hit
2,000 yuan a month by 2009, which would require the drafting of
another amendment in 2009 or 2010.
"Such frequent revisions are obviously unscientific and
careless," he said.
The individual income tax cutoff point was raised from 800 yuan
to 1,600 yuan a month last year. According to the Ministry of
Finance, the move freed 70 percent of wage earners from paying
taxes, but that figure has since slid to 50 percent because of
growing incomes.
Finance Minister Xie Xuren told legislators that raising the
cutoff point to 1,600 yuan would once again exempt 70 percent of
wage earners, which the ministry considers appropriate. He said the
number also took into account the effect any change in policy would
have on State tax revenue.
The ministry estimates that the move will mean a 30-billion-yuan
cut in State revenue, 2 billion yuan more than the loss resulting
from the adjustment last year.
However, the reaction of netizens on Sina.com, the country's
largest news portal, suggested that many people want the cutoff
point should be at least 3,000 yuan.
Other netizens said the cutoff point in Beijing and Shanghai
should be higher because of higher living costs in bigger
cities.
An Tifu, an economics professor at Renmin University of China,
said having various thresholds would prompt talented people in
western regions to move to bigger cities.
(China Daily December 26, 2007)