China's top legislature has adopted an amendment to raise the individual income tax threshold from 1,600 yuan (about US$220) a month to 2,000 yuan (aoubt US$273), a change intended to ease the burden of medium- and low-income earners facing higher living costs.
The amendment will take effect from March 1, 2008.
The change will reduce government revenues by 30 billion yuan (about US$4 billion) a year, according to official statistics. But it will also mean that 70 percent of income earners will be exempt from income tax, against 50 percent now.
The consumer price index climbed 6.9 percent in November, marking the fourth consecutive month when the index rose more than six percent. These price hikes have already affected ordinary citizens.
The individual income tax cut-off point was raised from 800 yuan (about US$109)a month to 1,600 yuan (about US$220) in 2006. This was based on consumption expenditures for basic living costs at the time.
"Over the past two years, basic living costs further increased. This required us to readjust the individual income tax starting point again," Finance Minister Xie Xuren told a legislative session of the National People's Congress Standing Committee.
Yang Jingyu, chairman of the Law Committee of NPC Standing Committee, said the majority of members of the Standing Committee supported the new threshold and some even thought it should be higher.
The revenue of governments at all levels has increased by more than 20 percent in recent years, much faster than gross domestic product has grown, and debates on whether the Chinese are being overtaxed have grown more frequent.
President Hu Jintao said in his report to the 17th National Congress of Communist Party of China in October that China would establish a more scientific revenue system to benefit the people.
"Compared with the total revenue increase, the reduction of individual income tax will not have many side effects, but it will do much to reduce people's tax burden," said An Tifu, vice president of Chinese Taxation Institute.
(Xinhua News Agency and Shanghai Daily December 31, 2007)