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Farmers Benefit from Agriculture Tax Cut

Zhang Jinliang, a farmer in north China's Inner Mongolia Autonomous Region, went to work on Friday with a sense of hope that was "previously unthinkable" as the government's policy on agricultural taxes was released.


"I have been working on farms for most of my life. I never expected that one day I would not need to pay taxes," said 69-year-old Zhang.


At the Second Session of the Tenth National People's Congress, which opened in Beijing Friday, Premier Wen Jiabao said China would abolish agricultural taxes in five years.


In Saihan District of Hohhot city, where Zhang and his family live, the local government has decided to scrap agricultural taxes this year.


Zhang's household has eight members, working 1.3 hectares of land. In the past, the household had to pay about 200 yuan in agricultural taxes each year.


China, with 900 million farmers, is the only country in the world, which still levies taxes on farming production. The state-set agricultural tax rate was 7 percent of the income from crops plus 1.4 percent of agricultural tax add-ons levied by local governments, making a total agricultural tax rate of around 8.4 percent.


Beginning this year, the agricultural tax rate would be reduced by more than one percentage point per year on average over the next five years, said Wen's report. All taxes on special agricultural products would be repealed except for tobacco, reducing the financial burden on farmers by 4.8 billion yuan annually.


Ma Xiaohe, director of Industrial Development Research Institute of the State Development and Reform Commission, considers the agricultural tax abolition a step towards setting a common tax in rural and urban areas, which currently have different tax policies.


Agricultural tax accounts for only 4 percent of China's fiscal income, but was considered a major burden on farmers. The income gap ratio between urban and rural residents increased from 1.8:1 in 1984 to 3.1:1 in 2003. Per capita annual income for Chinese farmers in 2003 was 2,662 yuan.


"Urban areas cannot maintain their prosperity amid rural impoverishment," said Ma. "If the situation does not change, China's future development would be hampered by rural problems."


Further more, heavy taxes deadened farmers' motivation. In China, grain is one of the major crops, but with falling prices and heavy taxes, farmers have instead been seeking work in cities, rather than growing crops. China's grain output has thus been decreasing since 1999, sparking fears about national food security.


These fears led to the central government issuing a "No. 1 Document", the first such document in 2004, to underline problems in the farming sector.


The document detailed central government's decision to slash agricultural tax rates by one percentage point. Following the "No.1 Document", all the provinces, municipalities and autonomous regions in the country have reacted quickly.


Beijing, and some other areas, like Hangzhou in eastern Zhejiang Province and Yan'an in northern Shaanxi Province, has adopted policies to abolish agricultural taxes. In the comparatively less advanced Anhui Province, in east China, the local government abolished the agricultural tax add-on, which generated 600 million yuan in revenue a year.


"Though it's not possible to eliminate the gap between urban and rural areas, at least we can do something to prevent the gap widening," said Xu Shanda, vice-director of the State General Taxation Bureau.


(Xinhua News Agency March 6, 2004)

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