Personal income tax threshold to be raised
By Su Bei (China Daily)
Updated: 2005-07-29 06:16

In fact, South China's Guangzhou and Shenzhen have already raised the threshold to as high as 1,600 yuan (US$198).

The current personal income tax policy, introduced in 1980 and updated in 1994, is far from perfect, according to Zhang Peisen, a senior researcher with the Taxation Research Institute under the State Administration of Taxation.

For example, the highest personal income tax rate for individual salaries is 45 per cent, while that for individual company owners is 35 per cent.

"It fails to effectively collect taxes from the rich," Zhang said.

An earlier report said that China's wealthy, who account for less than 20 per cent of the total population, own more than 80 per cent of the country's bank deposits.

But they contribute less than 10 per cent to the nation's personal income tax revenue.

Economists claimed China's rich have the smallest tax burden in the world.

According to researcher Ni Hongri from the State Council Development Research Centre, salary earners rank first among China's tax-payers, because collecting taxes from them is far easier as employers debit tax straight from salaries.

Figures from the State Administration of Taxation show China collected 173.7 billion yuan (US$21 billion) in personal income tax last year, accounting for 6.7 per cent of total tax revenue.

China's personal income tax system is still in its infancy compared with foreign countries, Ni said. "The country will have to improve the system."