The report said the interest tax, implemented in 1998, heavily affects low-income citizens because they tend to keep their savings in banks, and it may also dampen consumer spending.

The think tank said another option would be to combine the interest tax with the income tax so that different rates would apply at different income levels.

"Unlike rich people, who have many ways to manage their money such as buying stocks and property, poor people generally put their savings in banks because of the lower risks," said Shi Lei, a professor at Fudan University's China Center for Economic Studies.

"Therefore, although the amount of savings interest tax paid by the rich is usually larger due to their bigger savings, the weight of the tax is usually heavier on poor people."

Shi cautioned, however, that the abolition of the savings interest tax might encourage people to save more and spend less, which runs counter to China's current macroeconomic strategy.

In other areas, the research group predicted the country's retail sales will reach 7.58 trillion yuan this year, 12.8 percent after growing 12.9 percent in 2005. The growth will be higher in the cities than in rural areas, the report said.

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