Public want tax plan to narrow the wealth gap

0 CommentsPrint E-mail Shanghai Daily, May 27, 2011
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China's proposed income tax plans have prompted a huge response from the public with more than 230,000 comments, a record, posted online.

And they all seem to say the same thing - cut taxes and narrow the wealth gap.

By 5pm yesterday, 231,533 comments had been posted on the website of the National People's Congress, nearly one month after the top lawmakers asked for public reaction to a draft amendment which would increase the minimum threshold for personal income tax from 2,000 yuan (US$306) a month to 3,000 yuan.

The tax plan, which would cost the government 120 billion yuan in revenue, includes raising the minimum tax threshold and altering tax brackets to give relief to lower income workers, a pledge made by the government in its new Five-Year Plan.

Under the proposal, 12 percent of salaried workers will pay income tax, compared with 28 percent at present.

However, many people, especially those living in big cities such as Shanghai and Beijing, questioned whether the 3,000-yuan tax threshold was much of a bonanza while the country's inflation remained at a high level.

In a survey by Horizon China, 48.2 percent of respondents said the proposed threshold was too low and 58.7 percent of this group regarded 5,000 yuan as fairer.

The result echoed a nationwide survey conducted among 100 economists by leading website portal Almost 70 percent of the experts said the proposed threshold was too low.

Xiang Lan, an employee with the Beijing Tobacco Monopoly Administration, one of 16 representatives invited to the NPC to talk about the proposal, also suggested a 5,000 yuan threshold.

Another concern debated online focused on what is widely perceived as the current tax regime's greatest weakness - whether the rich are being fairly taxed.

More than 60 percent of the individual income tax collected by the government comes from the working class while less than 10 percent is from the rich, Ren Qiang, a professor with Central University of Finance and Economics, told the Beijing Youth Daily.

China defines taxable income as bonuses, lottery winnings and other income besides salary. But salary is the easiest to track.

In an interview with CCTV, Jia Kang, head of the Research Institute for Fiscal Science at the Ministry of Finance, said: "The super rich, mostly entrepreneurs who own their own businesses, simply don't pay themselves salary as such and thus avoid tax."

Li Xunlei, chief economist of Guotai Junan Securities Co, said: "The key thing is how the government can effectively impose taxes on the wealthy and make sure there's no way they can evade their responsibilities."

Income hidden from taxes in China may have reached 9.3 trillion yuan, or 30 percent of the country's GDP, last year, according to a report by Professor Wang Xiaolu of the China Reform Foundation.

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