China's top legislature on Saturday adopted a law amendment to raise the country's individual income tax threshold from 1,600 yuan a month to 2,000 yuan.
The individual income tax threshold increase was believed to relieve the economic burden of medium- and low-income earners amid the recent price increase of some goods.
The amendment will go into effect as of March 1, 2008.
Raising the threshold of individual income tax collection from 1,600 yuan to 2,000 yuan means a reduction of 30 billion yuan in state revenue a year, according to official statistics.
However, the rise in personal income tax collection threshold will free 70 percent of income earners from paying income tax. The current threshold of 1,600 yuan makes 50 percent of income earners free from paying the tax.
China's consumer price index climbed 6.9 percent in November, marking the fourth consecutive month the index had been above six percent. Price increases for various goods have already placed a burden on common families.
The individual income tax cutoff point was raised from 800 yuan a month to 1,600 yuan starting in 2006. This was based on an investigation of the then citizen's consumption expenditure for basic living costs.
"Over the past two years, citizen's consumption expenditure for basic living further increased. This required us to readjust the individual income tax starting point again," Finance Minister Xie Xuren told a legislative session of the National People's Congress Standing Committee.
In addition, laws on labor dispute mediation and arbitration, drug control, resolutions to the Law on Road Transportation Safety, the Frontier Health and Quarantine Law and the Law on the Protection of Cultural Relics, and a revision of the Law on Science and Technology Progress, were also adopted at the end of the session.