China's best-paid workers earned an average annual salary of 310,000 yuan (US$39,750) last year and most came from the power, energy and other State-controlled monopolies, income tax statistics revealed.

Personal income taxpapers were filed by 1,628,706 high-income earners by the April 2 deadline, the first time ever that China required self-declarations for those making more than 120,000 yuan a year, the State Administration of Taxation (SAT) said in a report yesterday.

In addition to the high paid workers from State-controlled entities, universities, hospitals and real estate agency workers were among the filers, the report said.

Eighty-one percent of the big earners came from Beijing and coastal economic engines such as Shanghai, Shenzhen, Xiamen, Qingdao, Ningbo and cities in east China's Jiangsu Province.

The average 310,000-yuan salaries comprised income payments, share dividends, private businesses and secondary jobs such as consulting work.

The report said the success of the first-year campaign was "near to the initial estimation made by the SAT, which stands at 1.7 million," said the report.

However, tax experts estimated that the number of people who should file could be as high as 6 million.

"But the number of the filers obtained so far is not bad as it is the first try in the country," An Tifu, a finance expert with the Renmin University of China, said.

An said the taxation bureaux provided only limited publicity on the new rule issued late last year.

Meanwhile, SAT said the campaign was "a big step forward in setting up a nationwide personal income tax declaration system covering all wage earners by 2010".

It will also serve as the footstone as China looks to reform its current personal income system into a unified one, the report said.

Currently, taxpayers pay personal income tax under 11 categories including basic salary, rental incomes and freelance earnings, each with different thresholds and rates.

The new rule was implemented partly because officials believe some high-income earners divide their incomes into several categories to evade tax.

"Lumping all income under one category and setting up a unitary personal tax system will help mend these loopholes," said An.

"By asking the high-income earners to declare all their incomes, the current self declaration campaign has paved the way for the final implementation of the unitary personal income tax system in the country," An told China Daily.

Tax authorities have said high-income earners who fail to file income statements will be subject to scrutiny.

Those who do not file a declaration face fines of between 2,000 and 10,000 yuan. And people who report false incomes could be fined up to 50,000 yuan.

Penalties for evading taxes could be five times the amount of unpaid tax plus a jail term.

(China Daily April 13, 2007)