Tax Office Cautious About Raising Minimum Level of Taxable Income

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Last updated at: (Beijing Time) Friday, August 23, 2002

Tax Office Cautious About Raising Minimum Level of Taxable Income

China should think carefully about raising the minimum level of taxable incomes for wage earners, a taxation official said on Thursday.

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China should think carefully about raising the minimum level of taxable incomes for wage earners, a taxation official said on Thursday.

The official, who asked not to be named, said the actual minimum level was much higher than the government-set 800 yuan per month when one considered other benefits such as pensions, unemployment, medical insurance and housing allowances.

Official statistics show that wage earners pay about 40 percent of China's total personal income tax, making it the government's largest source of personal income tax revenue.

The State Administration of Taxation (SAT) official said this ratio was in conformity with the state of economic development, income distribution and tax administration in China.

He said the average nominal rate of personal income tax in the country was among those in the upper-middle level in the world. Hesaid actual tax rates were lower because of poor management in taxcollection.

The number of wage earners paying taxes jumped from 9.6 millionin 1994 to 60 million in 2000. In such cities as Shanghai, Beijing,Shenzhen and Xiamen, wage earners paid more than 60 percent of local personal income taxes.

The official said since China charged different rates of tax on different individual incomes, people with equal earnings may pay different amount of taxes. He said the inequality of the current personal income tax system was an obvious flaw.

According to a study by the Chinese Academy of Social Sciences, wage earners have to pay higher tax rates than rich people because they do not have the means to spread the tax burden. Rich people are able to pay lower rates of tax on incomes from sources other than wages or salaries.

He said China would reform the current tax system to better tax the rich. The country would also change the system of deducting tax from pay rolls.

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