“Nothing is certain except death and taxes” wrote Benjamin Franklin more than 200 years ago. This is certainly one of the most enduring quotations from “The Benjamin” whose portrait is on the U.S. $100 dollar bill, an inventor, politician, writer and a U.S. founding father.
Now, thanks to China’s top legislature revising the personal income tax code in a sweeping overhaul of the tax system the “tax part” might become even more inescapable here too in the People’s Republic. Or will it?
Perhaps Chinese tax regulators might whimsically be able to declare (echoing Mao’s declaration of the PRC): Chinese tax regulators have “stood up” (起来). As legislators aim to make personal income tax changes to reduce taxpayer burdens and boost consumption.
We do loads of tax related work at all aspects; For the uninitiated the threshold at which people pay personal income tax in China is expected to be lifted to 5,000 yuan ($772) a month from the current 3,500 yuan, according to the draft amendment on Individual Income Tax Law (IITL).
I am happy to report this draft was submitted to the bimonthly session of China’s legislative body, the Standing Committee of the National People’s Congress (两会) this week and all us tax nerds are abuzz. This reduces some compliance obligations for Chinese SMEs.
FYI as a China legislative watcher, a draft revision usually receives three readings at the top legislature before ratification-adoption. The move is expected to increase residents’ income and enhance consumption power because it reduces the tax burden for individual taxpayers, especially people of low to medium income and the reporting by SMEs who employ these personnel.
A rough calculation shows an individual with 10,000 yuan in monthly income would pay 255 yuan less per month.
The revision is the biggest tax overhaul in over two decades and will cover details to further improve tax rate structure and efforts to further lower tax burdens, particularly among low and middle income individuals, according to the draft.
China’s income tax rates for individuals, comprising seven brackets with rates ranging from 3 to 45 percent of income, are expected to be adjusted to lower tax burdens.
For the first time, items deductible from personal tax will include such expenses as the cost of children’s education and continuing education, medical fees for major illnesses, interest on housing loans and housing rent.
Like the U.S. these newly added tax deductions will help raise the tax threshold and help in handling rising living costs.
The government would set specific rates for tax deductions in each category, once the draft amendment is approved by the regulatory body. Deductible real estate items are expected to benefit a wide group of residents who either rent or hope to purchase a home, but more measures are needed to make sure such efforts are in line with government pledges to rein in risks in the sector.
The taxation is expected to cover all personal income, including income from personal services and rewards and royalties’ writers earn, according to the draft.
In 2017, China’s total tax revenue rose by 10.7 percent year-on-year to 14.4 trillion yuan, and tax revenue from individuals went up by 18.6 percent year-on-year to 1.2 trillion yuan, according to the Finance Ministry statistics
