The threshold for monthly personal income tax is set to double to 1,600 yuan (US$198) a move experts hail as creating a more equitable society.
If, as expected, the amendment to the personal income tax law is approved by the current session of the Standing Committee of the 10th National People's Congress (NPC), Chinese earning less than 1,600 yuan (US$198) a month will not pay any income tax.
"It will ease the burden on low- and middle-income people, mainly wage-earners such as migrant workers and employees at enterprises," said Han Baojiang, economics professor of the Central Party School of the Communist Party of China.
The central authorities have started to use taxation as a tool to achieve the goal of building a "harmonious society," said Han yesterday in an interview with China Daily.
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 put forward 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.
In 1994, China began levying income tax on citizens earning more than 800 yuan (US$98) 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 to be watching with interest as most of their employees are Chinese. In addition, procedures for tax deduction by companies at source would be greatly simplified.
If the amendment is adopted next week, the new policy may take effect next month.
He Yongjian, an official with the Legislative Affairs Commission under the NPC Standing Committee, told Xinhua 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.
During the six-day session, which started on Saturday, the NPC Standing Committee will also deliberate the draft law on the quality and safety of agricultural products for the first time, and continue to examine amendments to laws on corporations, securities and property.
The NPC Standing Committee has also decided to revise the audit law at the session, which is expected to increase auditors' powers to find fraudulent information and fight corruption.
Li Jinhua, chief of the National Audit Office, made explanations on the amendments to lawmakers at the meeting.
According to the revised draft, high-ranking officials of government departments, and State-owned enterprises will be subject to audit.
Source: China Daily