Economy

State Council to discuss raising income tax threshold

(Xinhua)
Updated: 2011-02-28 09:21
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BEIJING - Chinese Premier Wen Jiabao said Sunday that the State Council would discuss a plan to raise the threshold of personal income tax.

The plan, if implemented, would benefit middle and low-income groups, Wen said in answer to a question on taxes during an on-line chat with the public.

The plan would be delivered to the National People's Congress, the country's top legislature, for review, he said, without specifying when the plan would come into effect.

Analysts have been calling for a rise in the threshold, which they believe could help relieve the economic burden of middle and low-income earners as consumer prices continue to rise.

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Liu Heng, vice-dean of the Taxation Affair School of the Central University of Finance and Economics, told Xinhua News Agency that Wen's announcement is a good news for the public as the measure would raise the purchasing power of the low-income individuals to offset the rise of the cost of living.

Liu said analysis shows that raising income tax threshold by every 500 yuan ($76) will exempt 10 percent of the tax payers.

Currently, individuals who earn a monthly income of 2,000 yuan or above are liable to pay income tax.

Liu said the current threshold is even lower than the cost of living in some big cities.

China's consumer price index (CPI), a major gauge of inflation, rose 4.9 percent in January from a year earlier as food prices increased 10.3 percent because of rising demand and a drought in key grain-growing regions. The CPI rose 4.6 percent in December and 5.1 percent in November, a 28-month high.

The government raised the threshold for individual income tax from 1,600 yuan to 2,000 yuan in March 2008. But many experts say the rise was not enough, lagging far behind the rises on wages and the consumer prices.

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