Date 14 December 2011
Individual Income Tax (IIT) system reform has long been a concern of number of members at the Lianghui (National People's Congress and Chinese People's Political Consultative Conference). A senior expert said that fundamental reforms of this system would likely be put into place by 2015.
China uses a progressive tax system with a minimum threshold. In September 2011, the income brackets and rates were changed, with the monthly income threshold adjusted from 2,000RMB to 3,500 RMB. These changes were put in place in an effort to increase local consumption and bridge the income gap. Although the change provided some benefit, the real issue with the system is its lack of accounting for individual economic burdens and household status, with no deductions or returns allowed. As part of the reforms, a system to take these into account with deductions or reimbursements is being considered.
Another major issue the reforms will tackle is that of extra-wage income and income from multiple sources throughout China. Current technical problems keep the tax authorities from fully tracking the sources of people’s income, but with the Golden Tax Project near completion, tax authorities will be able to track an individual’s income from multiple employers and across different regions. The project links all tax bureaus at the national, provincial, and township level into one system.
See here to learn more about individual income tax in China.
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