The Beijing municipal government's recent decision to raise the level of income exempt from tax has aroused close attention from experts and local residents.

Personal income up to 1,200 yuan (US$145) per month will not be taxed in Beijing from this month, 200 yuan (US$24) more than the old cut-off, the Beijing Municipal Local Taxation Bureau announced earlier this week, which means that tax will be collected only on monthly income in excess of 1,200 yuan.

"The change is being made to correspond to the significant rise in personal income since 1999, when income tax was paid on income over 1,000 yuan (US$121),'' Song Bangjie, vice-director of the personal income tax department under the bureau said in an interview.

"The amount of income exempt from tax must take current living needs and consumer prices into consideration,'' Huang Hua, associate professor of the taxation department under the Central University of Finance and Economics said, agreeing with the new tax change in the capital.

The level of income exempt from tax in Guangzhou, in South China's Guangdong Province, is 1,260 yuan (US$152), and in Shanghai 1,000 yuan (US$121).

Huang suggested, however, the taxation system be reformed further to make it more reasonable.

"I think the standard should not be fixed, as people with similar incomes bear different financial responsibilities,'' Huang said.

The professor thinks her idea may possibly be adopted within the next 10 years, but she is not overly optimistic. "China's personal income system has only been in place for nine years,'' she said.

Wang Jun, a 35-year-old Beijing resident urged raising the exemption level even higher. "Tax should target people with high income, not those whose income meets basic living requirements. I mean, the 1,000-odd yuan per month incomes you find in large cities like Beijing.''

But some experts who asked not to be named said further taxation reform must be determined by the central government, as any such changes must take State finance into account.

The new change in Beijing affects local residents, and does not apply to foreigners working and living in Beijing.

According to sources with the Beijing Municipal Local Taxation Bureau, the tax exemption level for foreigners is 4,000 yuan (US$483).

According to the Individual Income Tax Law, income of up to 800 yuan (US$97) is tax exempt. But local governments draft their own rules on the amount of extra tax exemptions.

China began to collect individual income tax from foreigners working in the country in 1980.

It is estimated that income tax revenue in Beijing will reach 12 billion yuan (US$1.5 billion) this year, one-fourth of total local taxation revenues.

(People’s Daily September 27, 2003)