Record public response to income tax move

Proposed 3,000 yuan threshold 'still too low' as wage earners bear burden.

A draft amendment to raise the personal income tax threshold from 2,000 yuan (215 euros) to 3,000 yuan a month has drawn a record response after the top legislature published it online to solicit public opinion.

The Standing Committee of the National People's Congress (NPC) put the draft amendment to the Personal Income Tax Law on its website at www.npc.gov.cn on April 25, sparking nearly 240,000 responses.

The number of suggestions received by May 31, the deadline for submissions, broke the record set by the draft Labor Contract Law in 2006.

The NPC Standing Committee reviewed the draft amendment for the first time during a bimonthly session that concluded in late April.

The amendment carried the tax proposal by the State Council, or Cabinet. The increased threshold is a bid to boost domestic demand and tackle the widening wealth gap.

The amendment also carried a proposal to cut the number of tax brackets from nine to seven. If the draft amendment becomes law, it will benefit more than 200 million people. It will also reduce the tax net, with only 12 percent of citizens liable compared to 28 percent currently paying taxes on a monthly income of 2,000 yuan.

If the move goes through it will boost the spending power of middle and low-income earners and achieve a more equitable distribution of wealth.

The proposal has prompted a nationwide debate on the tax burden faced by wage earners.

Analysts and economists predict that the proposal, to take effect within the year, could usher in a restructuring of the taxation system.

The draft amendment is expected to be sent to the NPC Standing Committee for a second review during its bimonthly session in June.

"Once passed, the suggested changes can be adopted very soon," Chen Sixi, deputy director of the NPC Internal and Judicial Affairs Committee, said on May 31.

However, many people still view the amendment as too conservative, saying their income has been eroded by inflation. According to an online survey conducted by qq.com, which polled about 2.4 million netizens, more than 77 percent of respondents say the threshold should be raised to at least 5,000 yuan. Nearly 79 percent doubt that the amendment will succeed in narrowing the wealth gap.

Li Daokui, an adviser to the People's Bank of China and professor at Tsinghua University, says the current tax system fails to effectively tackle income disparity.