Wealth Disparity in China Narrowed by Tax Reforms

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Last updated at: (Beijing Time) Friday, November 01, 2002

Wealth Disparity in China Narrowed by Tax Reforms

Thanks to the ongoing fee-for-tax reform, levies formerly imposed arbitrarily on farmers have been axed. Most farmers now expect a more comfortable lifestyle as only agricultural tax remains to be taken off the annual output of their farmlands...

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Despite a similar income from the same land this year, farmer Ma Zhiguo in Hohhot has made 300 yuan (36 US dollars) more in bank deposits than last year.

As the extra is enough for him to pay his children's tuition fees, the farmer with 1.7 hectares of land in a village in north China's Inner Mongolia Autonomous Region feels relieved.

Thanks to the ongoing fee-for-tax reform, levies formerly imposed by village and township heads arbitrarily on farmers have been axed.

Most farmers like Ma now expect a more comfortable lifestyle as only agricultural tax remains to be taken off the annual output of their farmlands.

However in cities, tax payment is becoming a nerve racking thing for some tax payers because the country's resolve to eliminate tax evasion is being increasingly felt.

In a revised regulation on the implementation of China's tax collection and management law effective as of Tuesday, new articles have been added to give tougher punishment to tax evaders. Experts say this will not only better protect the interests of taxpayers but also maintain justice and curb the increasing disparity of wealth.

Deterred by the toughening tax enforcement, a few singers, film stars and private enterprise owners who formerly attempted to dodge individual income tax by various means are beginning to pay with more readily.

Jin Renqing, director of the State Administration of Taxation, said the country's individual income tax is mainly used for social security fund to help the low paid and the vulnerable.

Figures from the National Bureau of Statistics show that in 2001, the annual income of Chinese farmers averaged 2,366 yuan (286 US dollars) while that of urban dwellers was as much as 6,860 yuan (829 US dollars).

A survey conducted last year of 40,000 urban households reveals that some 42.4 percent of the country's social assets were being held by the well-paid few, which is around 20 percent of the population.

Attributing the new-rich class to China's policy of encouraging a few to get rich first during its open-up and reform in the late 1970s, experts predict that the wealth gap between different regions may continue to enlarge.

To narrow the gap, the Chinese government has mapped out a package of measures in its tenth five-year (2001-2005) development plan, with the fee-for-tax reform as one priority.

In Anhui, the first pilot province for the reform, local farmers' total annual expenditure was reduced by 1.69 billion yuan(204 million US dollars), and their per capita payment of various fees and taxes slashed by some 31 percent.

Meanwhile, the country's personal income tax revenue climbed up from the 4.68 billion yuan (56.5 million US dollars) in 1993 to the 99.6 billion yuan (12 billion US dollars) in 2001.

Earlier this year, Finance Minister Xiang Huaicheng announced in the budget report that the trial of the rural fee-for-tax reform will be expanded to about one-third of China's provinces, and some 16.5 billion yuan (1.99 billion US dollars) will be allocated from the state revenue to facilitate the program.

As a result, the per capita income of Chinese farmers during the first half of the year grew by 5.9 percent, up 1.7 percentage points over the same period last year.

"I am confident about life since arbitrary levies on us are eliminated and the urban rich are learning to pay tax as required by laws," Ma said.

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