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Tax Threshold 'Still Too Low'

Taxpayers believe the government should raise the current 1,600-yuan (US$215) monthly income tax threshold to improve social equality, a survey published Monday said.

Conducted last week by the Beijing-based China Youth Daily, the results showed 97 percent of the 3,698 respondents thought the existing threshold was too low and wanted it to be increased.

"Personal income tax should be used to protect medium- and low-wage earners and balance the income gap between the rich and the poor," one respondent said.

Another said: "Ordinary people have become the major contributors of personal income tax, while wealthy people find ways to get round the rules."

Although the government raised the tax threshold from 800 yuan to 1,600 yuan on January 1, 2006, several respondents said this was insufficient.

One of those surveyed said the 800-yuan threshold was introduced in 1981, when the average monthly wage was just 60 yuan. The 1,600-yuan level was brought in last year, but the average monthly income of people in urban areas is now 1,853 yuan.

Wang Yijiang, a professor of economic management at Tsinghua University, said: "The 1,600-yuan benchmark for individual income tax is too low. It has stifled middle-level wage earners, who are the backbone of society."

Many of those polled said the low threshold, when combined with ever-increasing commodity prices and the skyrocketing cost of housing, was making it almost impossible to get by.

Zhao Rui, who works for an IT firm, said: "What I earn in three months is exactly what it costs for 1 sq m of a house in suburban Beijing.

"But still I have to pay hundreds of yuan every month in personal income tax."

Last week, the Beijing municipal bureau of statistics said the average cost of property within the Fifth Ring Road had risen to 13,754 yuan per square meter.

Wang said with the economy booming, the government could afford further tax cuts.

The government's total revenue was 4 trillion yuan (US$537 billion) last year, he said, and has been growing at an annual average rate of about 20 percent, much higher than the GDP rate.

The total revenue figure is estimated to surpass 5 trillion yuan this year, Wang said.

However, some experts have said it is too early to consider a further increase, as it had been adjusted just last year after much discussion.

Li Xuhong, a professor with the National Accountancy College, said: "Simply raising the threshold is not the answer to creating social equity.

(China Daily November 6, 2007)

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