Tax plays role in narrowing wealth gap

By Hong Guan (China Daily)
Updated: 2007-01-25 06:51

Cutting taxes for low-income earners and fighting tax evasion by the rich. That will be the formula for narrowing the wealth gap, the country's top tax official said yesterday.

"We will promote equity and social justice by making better use of taxation in adjusting income distribution," said Xie Xuren, commissioner of the State Administration of Taxation (SAT).

"We will reduce the tax burden on low- and medium-income earners, but will redouble efforts in collecting tax from high income earners," he told a press conference organized by the State Information Office.

He did not provide detailed plans.

The government abolished a centuries-old agricultural tax in 2005 to reduce the burden on farmers. Last year, it raised the threshold for personal income tax from 800 yuan ($103) to 1,600 yuan ($205).

The raised threshold for personal income tax dented collection growth last year. Revenue grew 17.1 per cent year on year, compared to 20 percent in 2005.

The deceleration in revenue growth indicates that the tax policy changes were effective in helping low income groups, said SAT deputy commissioner Wang Li.

But he pointed out that the continued growth of personal income tax albeit at a slower pace was mainly due to rapid income increases on the back of robust economic growth.

Wang said personal income tax paid by high-income earners grew much faster than last year thanks to stepped-up efforts to collect the tax from the top bracket.

Xie pledged that taxation authorities would take further measures to plug loopholes in collections.

Total tax revenues swelled by 21.9 percent to reach 3.76 trillion yuan (US$482 billion) last year. Growth has registered an average of 20 percent in the past decade, and exactly 20 percent in 2005.

(China Daily 01/25/2007 page1)

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