According to the latest explanation by China's State Administration of Taxation, the allowance paid by employers to cover the expenditures incurred from transportation and meals during an employee's business trip should be taxable. The country's tax authorities should have given the matter further consideration, says an article on Xinhuanet. Excerpts:

This is just the latest approach by the tax authorities to elaborate on personal income tax since China's top legislature raised the monthly tax exemption threshold from 2,000 yuan ($317) to 3,500 yuan last year. An earlier example is the Beijing tax authorities clarified that mooncakes given as gifts by employers to staff members are taxable as part of employees' in-kind income.

The country's personal income tax law stipulates how to levy personal income tax, regardless of the elaborations made by the tax authorities. Prior to these elaborations, many local authorities did not tax work-related reimbursement of meals and transportation, not because they failed to realize it was taxable income, but because they sought to reduce the burden on taxpayers amid price hikes.

Likewise, Shanghai tax authorities levied the disputed "mooncake tax" only when employers reported the gifts, thus striking a balance between legal principles and taxpayers' interests.

However, now that the elaboration has been released, local tax authorities will have to collect the personal income tax due. But statistics from the Ministry of Finance show that national tax revenues rose 22.6 percent year-on-year to 8.97 trillion yuan last year, a much higher growth rate than that of urban residents' disposable income per capita, suggesting more room for tax cuts in the future. Meanwhile the tax authorities should try to reduce the burden on taxpayers to the maximum extent permitted by law.

(China Daily 04/24/2012 page9)