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The warning that China's farmers face slowing income growth this year is especially disheartening against the backdrop that the country's tax revenue is expanding rapidly.

At a moment when the nation is paying unprecedented attention to equality of income distribution, stronger fiscal support is required to boost farmers' income growth.

Minister of Agriculture Du Qinglin warned on Friday that it would be difficult for farmers to match their income growth rate last year against falling grain and livestock prices and the rising prices of diesel, fertilizer and pesticides.

Figures from the ministry indicated farmers made an average of 1,238 yuan (US$154) from agricultural production in the first half of this year, up just 4.5 percent year-on-year. In 2005, the per capita net income of rural residents registered a real growth of 6.2 percent.

By scrapping agricultural tax, the Chinese Government has substantially reduced the tax burden on farmers in recent years. However, the latest income growth figure shows the trend of a widening rural-urban wealth gap has not been effectively stopped, not to mention being reversed. China's urban residents make on average three times what their rural cousins earn, and their income increased by 9.6 percent last year.

While the national economy keeps growing, the Chinese authorities have watched the widening gap between rich and poor more and more closely. High-profile calls have also been made very recently for stronger efforts to tackle this challenge.

For instance, President Hu Jintao on Thursday urged government agencies to double their efforts to "try to ease the trend of widening the wealth distribution gap between regions and certain social groups."

Yet, to deliver the pledge of social fairness in income distribution, policy-makers must better tap the swelling national coffers to further tilt financial and tax policies in favour of farmers.

Not that the Chinese Government has not made use of growing tax revenue to help increase farmers' incomes.

Besides the removal of agricultural tax, the government has injected more funds into rural regions to beef up infrastructure and education. According to Finance Minister Jin Renqing, the central government has already earmarked a budget of 339.7 billion yuan (US$42 billion) for rural regions this year, 42.2 billion yuan (US$5.28 billion) more than the total amount in 2005.

Fiscal support for farmers has indeed been enormous in recent years, but it is not enough in comparison with the growth in government revenues.

China's fiscal revenue soared almost 20 percent in 2005 to hit a record 3.16 trillion yuan (US$395 billion). Latest statistics indicate that China's tax revenues increased 22.3 percent year-on-year in the first six months of 2006.

Concerns over the potential impact of scrapping agricultural tax on the national coffers weighed heavily on the mind of policy-makers before introducing this crucial taxation reform. But the current rapid growth of tax revenues has proved otherwise. The development of the national economy is steady and fast enough to afford such a massive tax cut.

The government is in a better position to deal with income disparity as tax revenues are expanding than during other periods.

(China Daily July 10, 2006)