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Income tax on families would be fairer

By He Bolin (China Daily)

13:41, April 20, 2012

(China Daily Photo)

China's personal income tax has become a hot topic of discussion in recent years, as despite people's rising wages, inflation means people have less purchasing power.

Although, the threshold was raised to 3,500 yuan ($555.5) from 2,000 yuan last year, the higher threshold has not benefited everyone, especially those who work in smaller cities.

Even white-collar workers earning around 7,000 yuan a month in big cities like Beijing and Shanghai, where people pay large sums of money on accommodation, are complaining about the high cost of living.

Government statistics show that the average monthly wage in Beijing last year was 4,672 yuan, while for residents in Lanzhou, Gansu province the average monthly wage was 1,329 yuan a month. Hence a further raise in the threshold seems unlikely, given that any increase will not benefit those in medium and low-incomes areas, says Tao Ran, a professor at the China Center for Public Economics and Governance at Renmin University of China.

Especially those living in small cities where people's incomes are already often below the threshold and any raising of the personal tax threshold would be useless as a means of relieving their economic burden, says Tao.

Reforms in the future should focus on how to fully reflect a person's total income and ability to pay tax, says Zhong Jiyin, an economist at the Chinese Academy of Social Sciences. That means, the government needs to levy family-based income tax.

Taxpayers, even if they are around the same income level, have to deal with substantially different financial circumstances.

For example, a well-paid single white-collar staff and a senior manager who has to support his unemployed wife, child and parents not covered by pension system, both should pay a tax of 2,495 yuan for their monthly income of 17,500 yuan. The tax of 2,495 yuan will be trifle for the former but a heavy burden for the latter's family.

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