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Higher Tax Threshold Proposed

Legislators have proposed raising the threshold for personal income taxes to 3,000 yuan (US$410) to benefit low- and medium-income earners struggling to deal with recent increases in the prices of daily necessities.

A draft amendment to the Law on Individual Income Tax that is now being deliberated by the National People's Congress (NPC) Standing Committee would free those earning less than 2,000 yuan a month from paying income tax. The current level is 1,600 yuan.

But Nan Zhenzhong, a NPC Standing Committee member, said a 400-yuan increase would not be enough to ease the cost burden on urban residents, who have struggled to adapt to inflation.

"The public will be happier if the increase margin is bigger," he said.

Another member, Ren Keli, proposed setting the limit at 3,000 yuan to further benefit the public and to avoid the need to revisit the issue.

The consumer price index (CPI) climbed to 6.9 percent in November, the fourth consecutive month that the CPI had been above 6 percent.

The Ministry of Finance estimates that the basic cost of living each month - including food, clothing, accommodation and transport - of an average urban salary earner this year is 1,586 yuan. That amount is likely to climb to 1,745 yuan a month next year.

Ren said that if prices continue to rise, that figure could hit 2,000 yuan a month by 2009, which would require the drafting of another amendment in 2009 or 2010.

"Such frequent revisions are obviously unscientific and careless," he said.

The individual income tax cutoff point was raised from 800 yuan to 1,600 yuan a month last year. According to the Ministry of Finance, the move freed 70 percent of wage earners from paying taxes, but that figure has since slid to 50 percent because of growing incomes.

Finance Minister Xie Xuren told legislators that raising the cutoff point to 1,600 yuan would once again exempt 70 percent of wage earners, which the ministry considers appropriate. He said the number also took into account the effect any change in policy would have on State tax revenue.

The ministry estimates that the move will mean a 30-billion-yuan cut in State revenue, 2 billion yuan more than the loss resulting from the adjustment last year.

However, the reaction of netizens on, the country's largest news portal, suggested that many people want the cutoff point should be at least 3,000 yuan.

Other netizens said the cutoff point in Beijing and Shanghai should be higher because of higher living costs in bigger cities.

An Tifu, an economics professor at Renmin University of China, said having various thresholds would prompt talented people in western regions to move to bigger cities.

(China Daily December 26, 2007)

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