Raise Standard Line for Personal Income Taxation & Reduce Tax Rate: Ministry Report

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Last updated at: (Beijing Time) Monday, July 07, 2003

Raise Standard Line for Personal Income Taxation & Reduce Tax Rate: Ministry Report

Recently, the Sci-tech Research Institute of the Ministry of Finance has just finished a paper concerning "Situation on Income & Allotment of Chinese Citizens & Policy for Regulating Financial Taxation". This indicates that the question of the "Standard Line for Taxation of Personal Income" often and much argued among many people is going to enter into a stage for actual operation.

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A certain Xiao Zhao working in a foreign-owned enterprise has first to take a look at the "Tax Deduction" column on the slip of paper for his salary every month when getting it in his hand. This has actually come to be a habit for many a people now. More and more attentions must now be paid to the personal income tax in the eyes of most of the taxpayers.

Recently, the Sci-tech Research Institute of the Ministry of Finance has just finished a paper concerning "Situation on Income & Allotment of Chinese Citizens & Policy for Regulating Financial Taxation". This indicates that the question of the "Standard Line for Taxation of Personal Income" often and much argued among many people is going to enter into a stage for actual operation.

As suggested in the report "Situation on Income & Allotment of Chinese Citizens & Policy for Regulating Financial Taxation" recently completed by the Sci-tech Research Institute of the Ministry of Finance, the system for personal income taxation is going to be reformed with the standard line for taxation to be reasonably raised and the tax rate to be lowered. In the meanwhile, the policy for low-taxation-rate will be adopted for those in the medium-income group with a monthly average of RMB 3000 - 5000 yuan, for this is a group of persons with medium income. If imposing a too high tax on them it will restrict the expansion of consumption and contrarily enfeeble the economic increase.

Early as in the period of the "Two Congresses" this year, some CPPCC members put forward the relevant proposals by saying that the standard line for personal taxation was reasonable to be at RMB 1500 yuan and many experts also aired their opinions as how to regulate the taxation standard line for personal income.

The regional economic differences in China, said Qian Sheng, Vice Dean of the Finance & Banking Institute of the Chinese People's University, have made to show the differences of the indexes of commodity prices as against the economic income. If "walking abreast" is going to be practiced in all over the country as regards taxation of personal income it means obviously the negligence of special national conditions, which goes against the objective law. It is a pragmatic way to work out different standard lines for personal income taxation in accordance with the commodity prices in different regions.

In designing the standard line for personal income taxation, economic trends must be taken into consideration, said Associate Prof. Zhu Junsheng with the Institute of Management of the Communications University in Shanghai because the different income structures of citizens have made great changes to occur due to the reform in the fields of monetary allocation of houses, medical expenditure, educational expenses and old age pensions as well. The pretax deduction items of the aforesaid part must be made to increase. In addition, employment is also a crux of the matter. In some developed areas, taxation has been imposed on the family basis with the personal income tax to be less imposed if only one of the couple is working. And this is also good for alleviating the employment pressure.

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The standard line for personal income taxation being made at RMB 800 yuan is the decision made in the 1980s. At that time the income taxpayers were mostly the foreign personages working in China. The income level at that time could help ensure them to live a life of a middle class as did in international communities. Along with the speedy development of the economy in China the majority of the taxpayers have already overstepped the standard line and so many experts and scholars often raise the doubts, questioning the reasonability of the 800-yuan standard line for personal income taxation, holding an opinion that this has already eroded the basic living standard of the dwellers in cities. Actually, the 800-yuan taxation standard line in the "personal income tax law" has long been broken through in many economically developed areas, for instance the standard line for personal income taxation is 1000 yuan in Beijing, 1400 yuan in Zhuhai and 1700 yuan in Shenzhen.

By Han Rongliang, People's Daily Online

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