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China's Legislature Abolishes 2,600-year-old Agricultural Tax

China's 2,600-year-old agricultural tax will be rescinded as of January 1, 2006, after China's top legislature voted on Thursday to adopt a motion on the regulations revoking the agricultural tax.

The motion with only 94 Chinese characters was voted favorably by 162 lawmakers and abstained by one.

Wan Baorui, former vice minister of agriculture and vice chairman of the Agriculture and Rural Affairs Committee of National People's Congress (NPC) told Xinhua that the abolition of the agricultural tax demonstrates that industry has outgrown agriculture to some extent along with the country's economic development. And the country ushers into a new era of "industry subsidizing agriculture".

Official figures show that agriculture contributed to 13.1 percent of the nation's gross domestic product (GDP) in 2004, and industry and tertiary trade contributed to 46.2 percent and 40.7 percent respectively.

Agricultural tax, China's most ancient tax category, started to be collected in 594 BC. From that time, agricultural tax has existed for 2,600 years in China with dominant rural economy.

During the more than 2,000 years, agricultural tax was always the main source of the country's coffer. Since the founding of the People's Republic of China in 1949, agriculture has made great contribution to the country's economic development.

In 1953-1985 period, Chinese government purchased grains, cotton and other agricultural products with unified prices which were much lower than the prices in free market, so as to save money for developing industry.

In this way, Chinese farmers contributed 600 billion to 800 billion yuan (about US$75 billion - 100 billion) to the country's industrialization.

Over recent years, the gaps between city and countryside, urban citizens and rural residents were widened. Therefore, solving issues concerning agriculture, countryside and farmers have turned to be the urgent task for the Chinese government.

In 2005, the Chinese government and the Central Committee of the Communist Party of China (CPC) vowed to construct a "new countryside" so as to narrow the gap between city and countryside.

Wan said, the abolition of agricultural tax was only one of the important steps to fulfill the construction of the "new countryside".

Statistics, released by the National Bureau of Statistics (NBS) in December, showed that currently the proportion of primary, secondary and tertiary sectors in the GDP has changed to be 13:46:41.

"It demonstrated that the country's industry system has been in shape and the time for industry subsidizing agriculture has been ripe," said Wan.

Several signs have illustrated that the construction of "new countryside" was by no means a slogan, but a top issue in government's work agenda.

Last week, Premier Wen Jiabao announced at an executive meeting of the State Council that tuitions for nine-year compulsory education in rural areas will be exempted within two years. And the central government and local governments at various levels will allocate a total of 218.9 billion yuan (US$27.36 billion) to subsidize compulsory education in rural areas in five consecutive years from 2006.

In public finance sector, the government has remarkably intensified investment in rural areas over recent years. The public spending on issues concerning agriculture, countryside and farmers increased by more than 50 percent from the figure for 2002.

In 2004, the State Council exempted and reduced agricultural tax in trial in certain provinces. In 2004 alone, 50 billion yuan worth of agricultural taxes were exempted for 800 million farmers. Or say, the annual per capita income for Chinese farmers increased by 63 yuan, or 2.1 percent from the previous year.

Wan said the abolition of agricultural tax also sharpened the country's agricultural competitive edge in the international market. Giving that China has 86.7 million hectares of farmland, the abolition of agricultural tax means the per hectare grain production cost dropped by 570 yuan, or 10 percent - 20 percent from the figure of previous year.

(Xinhua News Agency December 30, 2005)


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