Savings interest tax unfair

(Shanghai Daily)
Updated: 2007-03-19 14:21

Nearly 94 percent of people feel the 20 percent tax on savings interest is unreasonable, according to a survey conducted by China Youth Daily.

The survey covered 6,723 respondents, 78.8 percent of whom said the tax should be eliminated, and 19.9 percent said there should be a threshold for the tax.

More than 90 percent of respondents said the tax affected low-income people more because they don't have multiple channels for investments, and 87.9 percent respondents said the tax failed to shrink income gaps.

Wang Chaobin, a deputy of the country's top advisory body, on March 8 proposed to eliminate the tax in this year's plenary summit, which won the support of 26 deputies, including renowned economist Wu Jinglian.

Rich people have many ways to manage their money such as buying stocks and property, while poor people generally put their savings in banks because of the lower risks, analysts said.

China began to levy a 20-percent tax on bank deposit interest in 1999 to reduce bank savings, boost consumption and curb deflation.

Wu said the interest tax has failed to reduce individual savings and had no obvious effects on stimulating domestic consumption.

About 43.3 percent of respondents said the tax won't sway their plans to save money.

Savings in banks reached 16.2 trillion yuan (US$2.09 trillion) last year, growing much faster than the gross domestic products, and interest tax reached 45.9 billion yuan.

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