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Income tax cutoff point raised to 1,600 yuan
(Xinhua)
Updated: 2005-10-28 08:56
China's legislature Thursday made a decision to raise the cutoff point of the
monthly personal income tax from the current 800 yuan to 1,600 yuan, effective
from Jan. 1, 2006.
The amount is 100 yuan (one US dollar equals approximately 8.1 RMB yuan)
higher than the proposed 1,500 yuan cutoff point in the draft amendments to the
personal income tax law, an indication that the law-makers have considered
opinions aired at a previous public hearing.
"We learned from this hearing that people hope the cutoff point should be
even higher," said Lou Jiwei, vice-minister of Finance.
"But in that case, fiscal revenue would decrease too much and our capability
to support the growth of the western regions would be impaired," he said.
According to Lou, more than 50 percent of central finance goes to transfer
payments to the relatively backward western regions.
He said raising the cutoff point from 800 yuan to 1,500 yuan will result in
more than 23 billion yuan (approximately 2.84 billion US dollars) loss of fiscal
revenue each year. Raising the point to 1,600 yuan will incur an additional
fiscal loss of more than 5 billion yuan (approximately 617 million dollars) each
year.
"After the adjustment of the cutoff point, the number of taxpayers will drop
by more than a half, approximately. It will live up to our legislative principle
to care for the interests of low and medium-income groups," said Lou.
Adjustment of the cutoff point has been one of the most discussed topics of
the general public in recent years.
The current standard of 800 yuan was instituted in 1993, when only around one
percent of the employed people earned more than 800 yuan. In 2002, the ratio
jumped to around 52 percent.
Draft amendments to the personal income tax law set the cutoff point at 1,500
yuan. The Standing Committee of the National People's Congress (NPC), China's
top legislature, decided to put the issue of cutoff point to a public hearing as
the adjustment is of widespread concern.
The hearing, held in late-September, is the first legislative hearing ever
held by the NPC Standing Committee. The Chinese media touted it as proof of
China's determination to advance democracy.
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