Newly issued notice to tackle wealth gap

A notice on deepening reform of income distribution was unveiled by the State Council late Tuesday, marking a solid step in the newly-elected Party leadership's determination to narrow the country's wealth gap.

According to the notice, highly-paid State-owned enterprise (SOE) executives would be put "on the radar," low-income groups would be given assistance, and the tax structure will be reformed.

The long-awaited notice came almost a decade after feasibility studies were initiated in 2004.

This is also in tandem with the objectives set out during the 18th Party congress in November which state that by 2020, both rural and urban incomes per capita will double the level of 2010 and the middle income group will continuously expand.

SOE executives will take the lead, as their salaries are sometimes several times higher than the incomes of employees in their companies.

The rate of increase of their salaries should be lower than the average rate for employees, reads the notice.

"Administrative instructions such as a cap on wages will have an immediate effect, but it can't solve the problem," Feng Pengcheng, a professor of corporate governance at the University of International Business and Economics, told the Global Times.

"The public criticizes those executives' high salaries, especially in monopolized sectors, as their profits are reaped from taking advantage of policies rather than taking market-oriented approaches," Feng said.

Zhu Boshan, general manager of Shanghai Tacter Investment Consulting, said many believe officials should not get such high salaries and further reforms should tackle this issue.

The benefits and welfare for SOE employees, referred to as "grey incomes," should be taken into account, Wang Xiaolu, deputy director of the National Economic Research Institute under the China Reform Foundation, told the Global Times.

The establishment of an income tax system that unifies the various income categories is also needed, and is a move that represents the direction of tax reform, Ye Qing, deputy director of the Hubei Provincial Bureau of Statistics, told the Global Times, adding that this would make it easier to supervise high-income groups. "The highest 45-percent tax level is rarely seen, as the rich always know how to avoid being detected."

The notice also stipulates that the tax on property ownership and transactions would be expanded nationwide, as Shanghai and Chongqing currently impose the tax on a trial basis. "The tax, which would greatly help narrow the gap, will probably be expanded nationwide in three to five years," Ye adde.