This cartoon shows that China will raise the minimum threshold for personal income tax from 3,500 yuan (about 544 U.S. dollars) to 5,000 yuan per month, or 60,000 yuan per year, as proposed by China's top legislature in a draft amendment to the Individual Income Tax Law on Tuesday. (Xinhua/Xu Jun/Shi Manke)
CHANGES FOR EQUITY
The current law has undergone seven revisions since it was enacted in 1980, when the original threshold for individual income tax exemption was 800 yuan per month.
It was raised to 1,600 yuan in 2005 and 2,000 yuan in 2007. The current threshold is 3,500 yuan according to the revision made in 2011.
According to the draft amendment, the previous method of taxing monthly income will be replaced with a new calculation which focuses on taxing annual income.
"The new method will be fairer and more reasonable for those whose monthly salary varies," said Zhang Bin, an expert from the National Academy of Economic Strategy of the Chinese Academy of Social Sciences.
If the revisions are adopted, those whose monthly salary ranges from 5,000 yuan to 20,000 yuan will see their tax cut by over 50 percent and those whose monthly salary ranges from 20,000 to 80,000 will see their tax cut by 10 to 50 percent.
"The personal income tax reform is primarily a good news for middle to lower income groups as people with less income will see a larger tax reduction," said Li Wanfu, head of the institute of tax science of the State Administration of Taxation.
