The threshold at which personal income tax becomes payable could be raised beyond the 1,500 yuan or US$185 mark, representatives in the country's top legislature recently proposed.
The Shanghai-based Business News reports Tuesday that 70 percent of the representatives in the country's parliament, the Standing Committee of the National People's Congress, suggest that the threshold for levying personal income tax is still too low.
"They consider 1,600 to 2,000 yuan (US$247) is a reasonable figure", a representative from the committee told reporters after the first review of the draft amendment to the personal income tax law on Monday.
China's law on personal income tax set the threshold for levying tax on individual income at 800 yuan (US$99) in 1980 and it remains unchanged despite the rapid growth in the country's economy.
The country quadrupled gross domestic product (GDP) in the two decades to the year 2000. Last year the country's per capita GDP exceeded 10,000 yuan (US$1,230).
In the first half of this year, the per capita disposable income of urban residents reached 5,374 yuan (US$663), while their rural cousins on average reached 1,586 yuan (US$196), up 9.5 percent and 12.5 percent respectively over the same period last year.
Meanwhile, the robust growth of the national economy has stoked an even more rapid upward spiral in tax revenues. Between 1994 and 2004, the country's total tax revenues soared five fold to 2.57 trillion yuan (US$317 billion).
Current income levels across the country have made the existing 800-yuan threshold, originally designed to tax the rich, a heavy burden for too many people.
"It's understandable, though technically against government rules, that 11 provinces and municipalities have already ventured to raise the tax threshold to 1,200 yuan (US$148) or 1,600 yuan (US$197)", Jia Zhijie, a member of the NPC Standing Committee was quoted as saying in the China Daily newspaper.
The Standing Committee of the 10th National People's Congress (NPC) deliberated on a draft amendment of the law during a six-day session from August 23.
Threshold changed according to CPI
The draft amendment of the personal income tax law also proposes to adjust the threshold according to the economic situation.
"We agree in principle that if the consumer price index (CPI) rises over 5 percent, the threshold should be adjusted again", an official from the State Taxation Bureau who participated in the discussion of the draft said.
He explained that such an adjustment should not be made in relation to the CPI's fluctuation over short periods of time, but within a period of time between 3 to 5 years.
The official said there is no proposal to lower the threshold again when deflation occurs, since China's economy has been consistently growing rapidly in recent years.
Income declaration
In order to better supervise the taxation of high-income earners, the draft amendment also proposes to require companies to declare the income of all their employees.
According to newspaper reports, the officials reviewing the draft point out that some companies do not include a full list of the income of their employees when they pay tax for them.
Some senior management staff with high incomes even distort their tax reporting sheets by averaging their income with other low-income employees, thus ensuring they pay less tax.
According to the draft law, companies should include all the required information regarding their employee's income, when companies pay tax for them.
Public hearing and draft revision
The second review of the draft amendment of the personal income tax law could be scheduled for November 22, after the public hearing on the draft amendment on September 27.
So far, more than 5,000 people have applied to participate in this, the country's first public hearing on a draft amendment of law. 4000 of them have registered online.
The Standing Committee of the 10th National People's Congress (NPC) will select more than 20 candidates to join in the public hearing.
(CRI September 14, 2005)
