The Economic Observer reported on Monday that the new individual income tax threshold would be no higher than 3,000 yuan (about US$438), and that it would be announced before the end of the year.
The Ministry of Finance and the State Administration of Taxation have submitted a draft proposal on raising the individual income tax threshold to the State Council, according to report in Monday's Economic Observer. It said the new threshold would be no higher than 3,000 yuan (about US$438) and that it would be announced before the end of the year.
The report said the draft aimed to encourage domestic consumption had presented three proposals for discussion. However, no matter which one is chosen, the threshold will not be raised dramatically. The present threshold is 2,000 yuan, and the new threshold will not be over 3,000 yuan. Another source at the Economic Observer said the threshold would probably be 2,500 yuan.
Another issue is the timing of the implementation of the new policy. According to the law, the new threshold requires an amendment to the Individual Income Tax Law, and must be approved by the Standing Committee of the National People's Congress (NPC). But the NPC Standing Committee has arranged to discuss 18 draft laws in 2008, and the Individual Income Tax Law wasn't included.
The NPC Standing Committee has one more meeting before the end of the year, so "there's still a chance to consider the tax threshold this year," an insider said.
Early in November, the Chinese government announced a 4-trillion-yuan stimulus package and reform of value-added tax (VAT), under which companies will no longer pay VAT on equipment purchases.
"These measures will put the government in a difficult position financially but we have no choice," said China's leading economist Zhou Qiren, urging governments at various levels to cut their administrative spending to cut the budget deficit, according to a China Daily report last week.
Zhou said the radical tax cutting package was among the suggestions he submitted to the central government. He also said that, quite apart from the fiscal stimulus and monetary policy changes, China needs comprehensive reforms and broader policy packages to cushion the negative impact of the unfolding global financial crisis.
For more details, please read the whole story in Chinese:
http://www.eeo.com.cn/finance/wire/2008/12/01/122113.shtml
(China.org.cn by Zhou Jing December 1, 2008)
