Targeted Deductions Crucial to Tax Reforms-IIT
AT THE ONGOING PLENARY SESSION OF THE 12TH NATIONAL PEOPLE'S CONGRESS, one from Hebei province and one from Chongqing municipality, proposed raising the monthly individual income tax threshold from 3,500 yuan ($507) to 10,000 ($1499) and reducing the marginal taxrate, the taxable share of income, from 45 percent to 23 percent for the highest-income group.
The two proposals, bold and specific, have caught people's attention. If they are adopted andimplemented, the government will effectively ease the tax burden on hundreds of millions of middle - and high-income families.
Raising the individual income tax threshold is always in the public's interest. But since an indiscriminate increase in the threshold will neither be fair nor serve the purpose of China's tax reforms, the authorities have decided to adopt various exemption standards to ease different income groups' financial burdens.
Programs allowing certain types of expenses to be deducted from the taxable income were put on trial in some places last year. For example, the policy to exempt the premium paid for commercial health insurance from the taxable income, which was launched in 31 pilot cities.
The tax reforms can achieve major breakthroughs this year, though they should be initiated gradually across the country owing to the different levels of development and supportive measures in place in different regions. Also, to make the reforms more effective, we need a more comprehensive policy design based on the advice of experts and public opinions.
Zetland Shanghai will pay close attention to the individual income tax reform.
For further information, please contact Ms. Phoebe Luo at phoebel@zetland.biz.
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