Chinese Low Income Earners to Enjoy Tax Cuts

Steven Bobson, Europe & Americas Editor
April 22, 2011 /

China is planning to cut taxes for its low income citizens to narrow the gap between rich and poor in the country, a Chinese report said on Thursday, April 21, 2011.

The proposed revision includes a raise in the lowest level of income subject to taxation from 2,000 yuan ($305) to 3,000 yuan ($480) and an elimination of two tax brackets, 15 percent and 40 percent.

In the new system, those with a taxable income of more than 50,000 yuan ($7,684) will pay an extra 600 yuan ($92) while those with a taxable income of 5,000 yuan ($768) will save 200 yuan ($31).

The system is also expected to take away 120 billion yuan ($18.4 billion) from China’s personal income tax revenue of 483.7 billion yuan ($74.3 billion) in 2010. The amount is only an insignificant reduction because personal income taxes only account for 6.8 percent of the total country’s revenue.

The tax changes were designed to help lower income families put more money in their pockets during times when rising prices are eroding their disposal incomes. Chinese authorities are hoping that the legislation would lead to fairer wealth redistribution and will help in rebalancing their country’s economy to be in line with Chinese President Hu Jintao and Premier Wen Jiabao’s leadership philosophy of a harmonious society.

Xinhua News Agency said that the changes were already anticipated last month but the details were only revealed on Wednesday, April 20, 2011.

The proposal is currently being reviewed by the National People’s Congress’ Standing Committee and is expected to be finalized and approved in a short time.


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