Income gap still hot topic

Narrowing the income gap has lately become a hot topic among members of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) since Premier Wen Jiabao's speech about income distribution reform on March 5.

Modification of the personal income tax has been a highlight of the discussions.

"I suggested considering taking the family as a unit for levying tax," Duan Qihua, a lawyer and the founder of Shanghai-based Duan & Duan Law Firm, who is also a member of the CPPCC National Committee, told the Global Times Tuesday.

Setting up a tax system covering personal tax, property tax and inheritance tax would be one way to narrow the income gap, Jia Kang, director of the Research Institute for Fiscal Science under the Ministry of Finance and member of the CPPCC National Committee, was quoted as saying Tuesday by chinanews.com, a website under China News Service.

Some CPPCC members have suggested raising the personal income tax exemption threshold.

The exemption threshold for personal income tax was raised from a monthly income of 2,000 yuan ($309.02) to 3,500 yuan in 2011, when the country's Personal Income Tax Law was amended.

The exemption threshold could be further raised to 5,000 yuan, Gan Lianfang, chairman of Beijing Xinpai Group and also a member of the CPPCC National Committee, was quoted by chinanews.com as saying Tuesday.

Li Shufu, committee member and chairman of Zhejiang Geely Holding Group Co, said that the threshold should be raised to 6,000 yuan.

But Zheng Xinye, a professor in the School of Economics at Renmin University of China, told the Global Times Thursday that it would be "unreasonable" to raise the threshold as high as 6,000 yuan, which is a very high income level in third-tier cities and small towns.

Zheng said the most effective and direct way to narrow the income gap is to raise the amount of the living allowance provided by the government to the urban and rural poor.

"Tax modification is an effective measure, but not the only way to narrow the income gap," Zheng noted.

"China has already launched several guidelines for improving income distribution reform, and needs to research specific measures to ensure execution of the government's policies," Premier Wen said in his government work report delivered to the annual session of the National People's Congress on March 5.

The State Council unveiled guidelines in February to reform the country's income distribution mechanisms. The guideline said China would double the average real income of urban and rural residents by 2020 from the 2010 level and speed up income growth for the poor.

"We have to admit that some issues, such as the increasing forms of gray income, are serious and have created social problems," committee member Chi Fulin said Tuesday.