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English 1000, Chinese 1000

Income-tax Threshold Rises to 1,600 Yuan

2005/11/15

Chinese legislators adopted a revised Personal Income Tax Law on October 27, raising the threshold for monthly personal income taxes from 800 yuan (about US$100) to 1,600 yuan (US$198), a move that will help ease tax burdens on wage earners and create a more equitable society, according to China Daily.

 

The amendment will become effective in 2006.

The Standing Committee of the 10th National People's Congress (NPC) also approved amendments to the Securities Law and the Company Law.

"It will ease the burden on low- and middle-income people, mainly wage-earners such as migrant workers and employees at enterprises," said Han Baojiang, an economics professor at the Central Party School of the Communist Party of China.

This is only a first step, he said. More measures will follow, such as the adoption of an inheritance tax.

 

A total of 20 representatives from all walks of life voiced their views and submitted proposals concerning tax issue, with most agreeing that the cut-off point should be raised. The move was widely hailed as a good example of heeding public opinion while formulating legislation.

Top lawmakers, while deliberating and adopting the income tax law amendment, accepted their proposals, setting the deduction level at 1,600 yuan (about US$198).

 

In 1994, China began levying income taxes on wage earners earning more than 800 yuan (about US$100) but, at that time, only 1 percent of the population earned more than that. Now, 60 percent of wage earners earn more than that.

 

The increased threshold will not have a bearing on foreigners working in China as they pocket 4,000 yuan (US$495) tax-free each month.

 

But many foreign businessmen and enterprises are likely watching with interest as most of their employees are Chinese. In addition, procedures for tax deductions by companies at will be greatly simplified.



 
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