Benjamin Franklin, one of the founders of the US, once said, “There are only two things certain in life: death and taxes.” For the Chinese, taxes are also a huge part of life. One of them is the “personal income tax”.
Simply put, this is a tax paid on the money people earn. The amount of tax a person pays depends on the size of their income.
On Aug 31, China’s top legislature passed an amendment to the Individual Income Tax Law. One big change is that the minimum threshold for personal income tax will be raised from 3,500 yuan to 5,000 yuan per month, or 60,000 yuan per year.
For the first time, the amendment also adds special expense deductions for items such as children’s education.
The change made to the income tax threshold will come into force on Oct 1, while the rest of the changes will take effect on Jan 1, 2019.
China introduced individual income tax in 1980. The present threshold is 3,500 yuan, according to an amendment made in 2011.
While the threshold has remained at the same level since 2011, prices have increased during that time, Guan Qingyou, chief economist at the Rushi Financial Research Institute, told China Daily. Guan noted this increased the tax burden on low- and middle-income groups.
According to Beijing Review, personal income tax is an important way through which to improve social fairness.
According to Xinhua News Agency, under the new changes, those with a monthly salary of 5,000 yuan to 20,000 yuan will have their tax cut by over 50 percent, while those with a monthly salary of 20,000 to 80,000 yuan will have their tax cut by 10 to 50 percent.
“The personal income tax reform is … good news for middle- to lower-income groups, as people with less income will [pay less income tax],” Li Wanfu, from the State Administration of Taxation, told Xinhua.