Government and Policy

China further mulls income tax reform

(Xinhua)
Updated: 2011-06-27 10:37

BEIJING -- China's top legislature on Monday started its second reading of an amendment to the country's individual income tax law.

The amendment revealed on Monday would keep the monthly tax exemption income threshold at 3,000 yuan (461.5 U.S. dollars), the same threshold specified during the first reading.

The draft amendment was submitted for its second reading on Monday morning, which marked the beginning of a regular bimonthly session of the 11th National People's Congress (NPC) Standing Committee

According to China's current law, individuals who earn less than 2,000 yuan (307.7 U.S. dollars) per month are not required to pay income taxes. The draft amendment submitted for the first reading on April 20 proposed raising the threshold to 3,000 yuan per month.

The current individual income tax law features a nine-bracket progressive taxing mechanism for people whose salaries are paid on a monthly basis. Taxes are calculated after subtracting the exemption threshold, with each level carrying different tax rates.

The smallest bracket features a 5 percent tax rate for people who earn monthly salaries between 2,000 and 2,500 yuan.

The new draft also proposes reducing the current minimum tax rate from 5 percent to 3 percent, which will further reduce the tax burden on low-income earners.

Hong Hu, vice chairman of the NPC Law Committee, briefed the lawmakers on the draft amendment at the Great Hall of the People, saying that the threshold would remain at 3,000 yuan in its first reading, despite public appeals for a further increase.