China to adjust personal income tax, develop new economic powerhouse

BEIJING, March 2 (Xinhua) -- An executive meeting of China's State Council, the Cabinet, has approved a draft plan to raise the personal income tax threshold and a plan to accelerate development of the Chengdu-Chongqing economic zone.

The draft plan, aimed at benefiting middle and low-income groups, will be submitted to the Standing Committee of the National People's Congress (NPC), according to a document released Wednesday on the meeting presided over by Premier Wen Jiabao.

The document said the draft plan for an amendment to the personal income tax law would include raising the tax threshold and adjusting the rating system.

The government raised the threshold for individual income tax from 1,600 yuan (242.4 U.S. dollars) a month to 2,000 yuan in March 2008. But many experts say the rise lagged far behind increases in wages and the consumer prices.

This year's amendment would be a concrete measure to transform the country's economic growth mode as it would invigorate consumption, said Zheng Xinli, a member of the annual session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), which is scheduled to open on Thursday.

More people would be inspired to start their own businesses, he said, adding that heavy income taxes on individuals running private businesses used to be a key factor restricting development of the service sector.

The reform of the wage and income distribution system was a hot topic at last year's annual sessions of CPPCC and the NPC. Sixty-two NPC deputies suggested lower rates or a higher personal income tax threshold.

"I earn about 2,000 yuan a month and my wife 800 yuan. We have a son in middle school. It will help if the threshold can be raised from 2,000 yuan to 3,000 yuan," said Liao Ruen, a driver from south China's Guangxi Zhuang Autonomous Region, who has just arrived in Beijing as a deputy to the NPC.

It is believed the threshold could be raised to 3,000 yuan and the current nine-bracket progressive rating system would be changed to reduce the tax burden on wage earners.

According to the Ministry of Finance, revenue from personal income tax totaled 394.9 billion yuan, 63 percent of which came from wage earners, in 2009.

Wang Youwei, a deputy to the NPC, suggested governments of different regions should be allowed to decide local thresholds as wage levels varied among different areas.

China's policy-makers have vowed to vigorously adjust the pattern of national income distribution and establish a practical rate system.

Zheng said the new system could take one household as a unit because it would be more balanced and fair.

Tuesday's executive meeting of the State Council also discussed a plan to accelerate development of the Chengdu-Chongqing economic zone.

According to the document, the zone, which covers 31 districts and counties in Chongqing and 15 cities in Sichuan province, will become an important economic center and a national industrial base by 2015.


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