China eases tax burden on wage earners

SHANGHAI: China has raised the threshold at which people must pay income tax, state media said, as Beijing moves to ease the burden on low-income earners struggling with soaring food and housing costs.

Authorities have lifted the minimum tax level to 3,500 yuan a month (US$543) from 2,000 yuan, the official Xinhua news agency said on Thursday, after taxpayers slammed the previously proposed threshold of 3,000 yuan as too low.

The measure, which takes effect in September, would slash the number of income taxpayers to 24 million from 84 million, Xinhua said, citing Wang Jianfan, vice-director of the finance ministry’s tax department.

That means only 7.7% of wage earners would have to pay income tax, compared with the current 28%, Wang said.

“It reflects the compensation provided by the nation for rising living costs driven by factors such as price rises,” Wang was quoted as saying.

The move is also in line with official efforts to boost domestic consumption as the government tries to reduce its reliance on exports and investment to drive the world’s second-largest economy.

Beijing has made containing inflation, which hit a near three-year high of 5.5% in May, its top priority this year.

Despite signs the Asian powerhouse is slowing, analysts expect inflation accelerated in June and authorities are tipped to raise interest rates for the fifth time since October in the coming weeks.

Chinese Premier Wen Jiabao reportedly said on Monday it would be difficult to hold inflation within the government’s target of 4%for 2011, but added that fighting rising consumer prices remained a priority.

China last increased the threshold for personal income tax from 1,600 yuan to 2,000 yuan in 2008, when the country’s consumer price index hit 5.9% for the year. — AFP