China won't release policies to abolish the interest tax in a short time due
to the fact that the tax can only be abolished through legislation, the Finance
and Investment newspaper reported today.
The launch of the tax was decided by the Standing Committee of the National
People's Congress (NPC), China's top legislative body, in 1999, according to Liu
Huan, a professor with the Central University of Finance and Economics.
"Canceling the tax also must be decided by the legislation body," Liu added.
"As a kind of income tax, any significant adjustment must go through legislation
expert with the Ministry of Finance also pointed out that although the State
Council, China's cabinet, was authorized to set the starting time and collection
measures of the tax, it has no power to stop collecting the tax.
China's consumers price index grew 3.4 percent in May, the highest in more
than two years. Benchmark one-year deposits carry an interest rate of 3.06
percent. Thus the real interest rate is negative, raising the pressure for an
interest rate hike and the abolishment of the interest tax.
In May, China's household deposits plunged by 278 billion yuan (US$36.2
billion), after a 167 billion yuan decline in April, as more and more people
withdraw money and invest in the stock market, so canceling the tax may enhance
the attractiveness of depositing in bank accounts.
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