HEFEI: Xiao Xihai, a peasant in Wuwei County in East China's Anhui Province, used to be a headache for local officials collecting rural taxes.

But he has since dramatically changed into a model taxpayer thanks to rural tax reform.

Three years ago, Xiao not only refused to pay any taxes or fees but also instigated neighbouring villagers to refuse to pay.

Nowadays, Xiao is usually the first in his village to pay rural taxes. Others have followed his example and now 95 per cent of the village's annual taxes are collected within a few days.

Xiao still remembers his change of attitude in the spring of 2000, when the central government decided to let Anhui reform its burdensome rural tax structure.

More than 40 tax categories were lifted, and households such as Xiao's were required to pay only agricultural tax. The annual tax bill for Xiao's family dropped by 200 yuan (US$24).

"Before the rural tax reform, our villagers were weighed down by heavy arbitrary fees," Xiao said, adding that "most of the tax we paid ended up in the hands of corrupt village cadres."

Under new rural tax reform measures, the highest tax rate was set at 8.4 per cent of farmers' output.

"We pay taxes to the State now," Xiao claims. "Anyone who dares to charge 1 cent in arbitrary tax is breaking the law."

Two-thirds of China's 1.3 billion people live in the countryside and many of them find the double burden of low incomes and hefty taxes too much to handle.

Experiments in comprehensive rural tax reform are being encouraged by the State Council, China's cabinet.

Trials took place last year in 20 provinces, autonomous regions and municipalities and in many counties and cities in other provinces.

The State Council is seeking improved policies to achieve a significant reduction in the financial burden on farmers and sufficient funding for compulsory education in the countryside.

Rural tax policies should be further improved to gradually reduce the amount of the agricultural speciality tax and to work towards a situation where the tax could be abolished completely.

Analysts said it is important to continue reducing taxes and other levies on millions of Chinese peasants, whose incomes have lagged behind those of city dwellers.

He Kaiyin, an agricultural expert, said: "Rural taxes account for a very small proportion of China's total of 1.9 trillion yuan (US$229 billion) in annual financial revenue.

"But the 900 million peasants are the largest and most important social class in the country and the standardization of rural taxes is significant for social stability and economic development."

The lifting of arbitrary fees on peasants not only changed Anhui farmers' attitudes towards paying tax but also eased the burden of peasants in other provinces, such as neighbouring Zhejiang, where peasants now pay 63 per cent less following tax reform.

An agricultural industry official in Anhui Province, who refused to be identified, said: "We have improved the efficiency of government at grassroots level by streamlining more than 110,000 cadres, who used to go from door to door urging peasants to pay hefty taxes and administration fees."

Xinhua