China raises tax threshold to ease burden on poor

BEIJING, Dec 23, 2007 (AFP) – China has proposed lifting millions of its citizens out of the income tax net to ease the burden on low-wage earners amid rising inflation, state press said Sunday. The country is expected to raise the monthly tax threshold from 1,600 yuan (218 dollars) to 2,000 yuan and the legislature was reviewing the proposal, the Xinhua news agency reported.

The new threshold would free 70 percent of wage earners from income tax, much higher than the current figure of 50 percent under the existing limit, it said.

“The increase of individual income tax collection threshold is within the country’s financial bearing capacity and aims to relieve the economic burden of medium and low income earners,” finance minister Xie Xuren said in the report.

The proposal comes with China’s inflation at a near 11-year high of 6.9 percent amid surging economic growth.

“Over the recent two years, citizen’s basic consumption expenditure for basic living further increased. This required us to readjust the individual income tax starting point again,” Xie said.

The new tax level would stimulate consumer spending but cut the state’s tax revenue by 30 billion yuan, Xinhua said.