Government and Policy

China to amend individual income tax law

(Xinhua)
Updated: 2011-06-27 21:15

BEIJING - The top legislature on Monday started its second reading of an amendment to the country's individual income tax law.

The amendment revealed would keep the monthly tax exemption income threshold at 3,000 yuan ($461.5), the same threshold specified during the first reading.

The draft amendment was submitted for its second reading on Monday morning, which marked the beginning of a regular bimonthly session of the 11th National People's Congress (NPC) Standing Committee

According to current law, individuals who earn less than 2,000 yuan ($307.7) per month are not required to pay income taxes. The draft amendment submitted for the first reading on April 20 proposed raising the threshold to 3,000 yuan per month.

The current individual income tax law features a nine-bracket progressive taxing mechanism for people whose salaries are paid on a monthly basis. Taxes are calculated after subtracting the exemption threshold, with each level carrying different tax rates.

The smallest bracket features a 5 percent tax rate for people who earn monthly salaries between 2,000 and 2,500 yuan.

The new draft also proposes reducing the current minimum tax rate from 5 percent to 3 percent, which will further reduce the tax burden on low-income earners.

Hong Hu, vice chairman of the NPC Law Committee, briefed the lawmakers on the draft amendment at the Great Hall of the People, saying that the threshold would remain at 3,000 yuan in its first reading, despite public appeals for a further increase.

Citizens around the country began debating the first draft amendment, which plans to raise the threshold to 3,000 yuan per month, after the top legislature started to collect public proposals and opinions of the amendment in April.

The NPC Standing Committee publicized suggestions and opinions on amending the law that were submitted online on June 15, hoping to gain useful ideas for lawmakers to give a green light to the amendment.

Among the 82,707 citizens who commented on the draft amendment, 15 percent favored raising the exemption to 3,000 yuan. However, 48 percent suggested to further raise the exemption to 5,000 yuan per month.

In addition to raising the individual income tax exemption threshold, many people proposed that the government should consider more methods for citizens to apply for tax reduction and reimbursement in raising families, education and medical treatment.

The exemption threshold of 3,000 yuan was proposed in accordance with the average urban resident's consumption level per capita and the calculation of the proportion of monthly salaried taxpayers among all monthly salaried citizens, Hong said when briefing lawmakers.

"The threshold as well as reduction of the minimum tax rate is mainly expected to further reduce middle-and-low-income citizens' tax burdens," he said.

According to Hong, reducing the minimum tax rate from 5 percent to 3 percent will give 70 percent of the monthly salaried taxpayers a lower tax burden.