China's tax authorities on Wednesday said they were waiting for improvements in the response to the country's new self-declaration system under which only two percent of high-earning Beijing residents have reported their 2006 earnings to date.

The new system requires those who earned more than 120,000 yuan (US$15,400) last year to report their earnings to tax authorities in the first three months of 2007.

It is estimated that 300,000 to 350,000 people earn more than 120,000 yuan per year in Beijing.

Tax authorities in the capital had received the most declarations among China's cities, said a report in the Beijing Morning Post.

"The number of declarations will gradually rise," said Wang Li, deputy commissioner of the State Administration of Taxation (SAT), on Wednesday.

"It takes time for people to calculate their annual earnings and exchange information with their employers before figuring out whether they should pay more taxes or get a rebate," he added.

The State Administration of Taxation issued a regulation on the new system in November last year, stipulating fines ranging from 2,000 to 10,000 yuan for those who fail to make a declaration and fines of up to 50,000 yuan for false reports.

This is the first time that the Chinese tax authorities have required high-income earners to report their annual earnings. However, this will not lead to double tax payments because income taxes will continue to be deducted at source by employers.

But the newspaper reported that China lacked a personal credit record system that helped punish dishonest taxpayers and tax evaders.

Meanwhile, Chinese taxpayers were not given the same "rewards" as people in countries with developed personal income tax systems. For example, in the United States, taxpayers' children had free access to education, libraries and parks, said the report.

Wang said 42,500 high-income Chinese reported their earnings during the first 22 days this year.

Tax authorities levied an additional 52.26 million yuan on their annual incomes and paid 389,000 yuan in rebates.

The SAT required people to report their annual earnings in order to ensure the government had complete information about tax payments, and to encourage them to abide by the law and pay taxes honestly and pave the way for future taxation reforms, said Wang.

The self-declaration system is expected to improve tax collection among high income earners and help narrow the gap between rich and poor.

(Xinhua News Agency January 25, 2007)