Finance Minister Jin Renqing, attending a national fiscal conference in Beijing on Monday, reiterated that the government intends to scrap all agricultural taxes.

Today, Xinhua reported that the phase-out represents another significant step to relieve the financial burden on the country's 800 million farmers and an attempt to narrow the widening income gap between urban and rural households.

To date, 28 of 31 provincial areas on the mainland have exempted farmers from agriculture taxes. The last three provinces are expected to follow suit next year.

The minister said central government allocated 66.4 billion yuan (US$8.3 billion) in transfer of payments to local governments to compensate for the phase-out this year, an increase of 271 percent over that of 2002.

Tax authorities said China is expected to collect only 1.5 billion yuan (US$187.5 million) in agricultural tax this year compared with 23.2 billion yuan (US$2.9 billion) last year.

Farmers' income grew 6 percent last year, reportedly due to the tax reform and grain production subsidies from central government, the fastest growth since 1997.

Jin said total funding from central government for farmers, agriculture and rural areas is expected to exceed 300 billion yuan (US$37.5 billion) this year, up 50 percent on 2002.

Local governments have also increased funding for rural areas, he added.

China used to collect up to 60 billion yuan (US$7.5 billion) in agricultural taxes before tax reforms began three years ago.

Agricultural tax was one of the key sources of revenues for central government in the 1950s. In recent years it accounted for one percent of total government revenue thanks to rapid development of other industries.

State revenue hit 2.8 trillion yuan (US$356.87 billion) in the first 11 months, up 18.5 percent year on year, and is expected to reach 3 trillion yuan by the end of 2005, according to official figures.

(Xinhua News Agency December 20, 2005)