China's top legislature Wednesday began discussing a draft bill
that would suspend or cut the longstanding tax on interest earned
on personal savings, in order to make bank deposits more attractive
for citizens.
The draft bill was submitted Wednesday to the ongoing 28th
session of the Standing Committee of the National People's Congress
(NPC), or the top legislature, for deliberation.
In recent months, China has seen large sums of money flow from
deposit accounts into stock trading accounts.
Chinese people have always been keen on putting their money in
banks but a bull stock market and soaring housing prices have made
many realize that the yield on bank deposits is simply too low,
said Huang Fuguang, a finance professor at Tianjin-based Nankai
University.
China began to tax interest earned on savings accounts on
November 1, 1999. The 20-percent tax was levied on all Renminbi and
foreign currency savings accounts opened by individuals in banks in
China.
By the end of 2006, the tax had generated 215 billion yuan.
"Taxing the interest on savings accounts has encouraged
consumption and investment and helped regulate personal incomes,"
said Jin Renqing, Minister of Finance on Wednesday to
legislators.
In the current economic climate, with the consumer price index
rising, returns from personal bank savings had declined, he
acknowledged.
After a number of voices were raised in recent weeks calling for
higher returns on personal bank savings, the top legislature has
now decided to look into the matter.
Jin said China's economy is developing strongly. "In these
conditions, state finances are able to handle a suspension or
reduction of the tax on interest on saving accounts."
(Xinhua News Agency June 27, 2007)