Higher personal income to aid the needy

08:35, February 28, 2011      

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China's central government will send a bill to the National People's Congress for approval that raises the threshold of taxable personal income to help Chinese households cope with rising cost of living.

Premier Wen Jiabao said during an online chat with a surging number of Chinese Netizens Sunday, that the threshold raise will be discussed by the State Council, the cabinet, Wednesday and then delivered to the NPC for review and approval.

The announcement immediately gets a roaring warm response from Chinese Netizens, who have long argued for the raise of threshold of taxable income. The last time Beijing raised the starting line in 2008 from 1,600 yuan to 2,000 yuan.

Though Wen did not reveal by how much the threshold is going to be raised this time, analysts have predicted it will rise to 2,500 yuan or even 3,000 yuan.

Experts believe that the move will act like hitting two birds with one stone: to aid average Joes combat rising inflation with a fatter income, and to help expanding domestic consumption and give a boost to China's economy at a time Beijing has implemented a spate of a dministrative measures to restrain a bubbling housing market.

The move will also help social tranquility and stability, as Chinese residents have more to spend, experts say.

The raise of the threshold shall partially offset the negative impact of a cooling real estate sector on the overall economy, experts said.

Premier Wen Jiabao also said that Beijing has planned to pursue 7 per cent GDP growth rate during the next five years or the 12th Five-Year Plan period. China achieved an annual 10 percent economic growth during the previous Five-Year Plan period.

China started to collect individual income tax in 1980 for monthly incomes that exceeded 800 yuan. In 2008, the taxable starting line was hike to 2,000 yuan when residents' income in urban areas has risen accordingly.

Inflation has jumped since the second half of 2010, and experts said it may peak in spring this year. In January the CPI rose to 4.9 percent, and is expected to stay there for a couple of months.

The country collected 483.7 billion yuan in personal income tax last year.
Rising cost of living has Chinese households tighten their wallets, which will drag domestic consumption and negatively impact economic growth. By raising the threshold of taxable personal income, people will have more income in their pockets which encourage them to consume.

People's Daily Online


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