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[Ferro-Alloys.com] China's income tax regime needs to be changed to ensure equitable income distribution, Finance Minister Lou Jiwei said Mar 6th at apress conference during the ongoing annual session of the National People's Congress (NPC).
The government is considering a plan to establish a fairer, more comprehensive system for individuals, as well as taking family expenditure into consideration, Lou said.
Reform of the policy for income tax for individuals has been a hotly discussed topic at the ongoing sessions of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and the NPC, partly because there has been an increase in the country's wealth gap recently.
China's Gini coefficient, a measure of income inequality, reached 0.473 in 2013, according to the National Bureau of Statistics. According to the UN, a figure of above 0.4 indicates a risk of social conflict.
Some CPPCC members and NPC deputies advised raising the threshold for individual income tax.
Li Yongzhong, an NPC deputy, said Tuesday that the threshold should be raised to salaries of 5,000 yuan ($817) per month, up from the current 3,500 yuan.
Cao Dewang, a member of the CPPCC and founder of Fujian-based glass manufacturer Fuyao Group, called for a much higher rise.
"All my employees have to pay income tax as their average monthly income is more than 6,000 yuan. If you take inflation into account, the threshold should be 30,000 yuan," Cao was quoted by Nanjing-based Yangtse Evening Post as saying on Wednesday.
A survey by Sina Weibo showed that as of 23:00 Thursday, 91.1 percent of 821 respondents were hoping for a significant rise in the threshold.
But it would be unfair to just lift the threshold without giving consideration to varying expenditure by different families, Lou noted.
Many taxpayers are at the same income level, but their family expenses in areas such as elderly care and education can vary substantially, he said.
"An individual can live fairly comfortably with a monthly salary of 5,000 yuan, but will have a hard life if they have a child to support," remarked Lou.
China's current income tax system is based on 11 different areas of an individual's income, such as dividends and rental income, and has long been criticized for being ineffective.
The current system makes it easy to avoid paying tax, and can lead to a gap between individuals with a sole income source and those with multiple income sources, Sun Yudong, a professor at the School of Public Administration and Policy at Renmin University of China, told the Global Times Thursday.
The government has long been planning to revise the income tax system. The Third Plenary Session of the 18th Communist Party of China Central Committee held in November 2013 emphasized the need for tax reform.
But before the system can be reformed, many obstacles need to be removed, and developing a mature collection mechanism is the priority, Zhang Bin, director of the taxation office at the Beijing-based National Academy of Economic Strategy, told the Global Times Thursday.
The collection of individual income tax is a tough task for local taxation authorities, Zhang said, citing the absence of an effective property information registration system and the problem of taking increasingly diversified income channels into account.
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