The Ministry of Finance has proposed raising the minimum taxable personal income from 800 yuan to 1,200 yuan a month, falling short of expectations that it would be lifted to 1,500 yuan.

The ministry has sent the draft of its provisional personal income tax reform plan to the State Council for approval. A source at the ministry said that the 1,200 yuan figure had been selected because the plan is a transitional one.

Beijing's Economic Observer quoted an official from the Ministry of Finance as saying that the transitional tax plan is not required to go through the legislative process in the National People's Congress.

The 800-yuan-a-month minimum taxable income has been intact since 1981. It has been criticized nationwide for the toll it takes on low-income families.

The ministry has postponed raising the minimum because personal income tax accounts for a sizeable chunk of the state's revenue.

The Ministry of Finance reports that the government levied 141.8 billion yuan (US$16.5 billion) in taxes on personal income in 2003, accounting for 6.5 percent of China's total tax revenue. In the first half of this year, the state pulled in another 88.1 billion yuan, an increase of 20.6 percent from the same period last year.

Yang Chongchun, deputy secretary-general of the China Taxation Association, said that the rise in minimal taxable income is only a subtle adjustment of the tax brackets that will not result in a significant loss of revenue.

"It will ease the burden of low-income individuals as we will tax more -- within a reasonable range -- in the high-income brackets," explained Yang.

Because of geographical economic differences, the exact amount of taxable income remains under discussion. "We have agreed to set a standard that is subject to change according to provincial conditions," said Professor An Tifu, of the Finance Department at Renmin University of China. "The fluctuation rate can be up to 20 percent."

(China Daily August 19, 2004)