China is expected to abolish the agriculture tax imposed on the country's more than 900 million rural residents next year three years ahead of schedule, experts said.

Premier Wen Jiabao vowed this March that China will axe such a tax within five years.

Gao Peiyong, a senior economist with the Chinese Academy of Social Sciences, said the government is likely to speed up the process.

The government may also reduce the agriculture tax rate by a large margin next year, which stands at about 7 per cent at present, he told China Daily.

"It is also likely the tax may be cancelled completely," he said.

The adjustment in the tax, which is estimated by many economists at about 50 billion yuan (US$6 billion), means rural residents will hold more money in their pockets.

"It will be an important measure taken by the central government to increase rural people's income," he said.

The step is in line with the central government's decision to list boosting agricultural as one of its priorities next year.

The Central Committee of the Communist Party of China's annual Conference on Economic Work said over the weekend the government would continue to beef up support to agriculture, rural areas and rural people next year.

Finance Minister Jin Renqing also said in an article published in the People's Daily on Tuesday the government would continue to deepen fees and tax reform in rural areas in 2005.

Zhang Peisen, a senior researcher with the Taxation Research Institute under the State Administration of Taxation (SAT), said an abolition of the agriculture tax was possible.

"The SAT has already arranged plans to call off the tax step by step," he told China Daily.

In fact, there were already five provinces and municipalities such as Beijing and Anhui announcing to cancel the tax this year.

Provinces in major grain production areas such as Henan, Hubei, Jilin, Liaoning and Heilongjiang also announced to cut the agriculture tax rate by 3 percentage points this year.

The government has always paid special attention to increasing rural people's income, as this will have a great impact on the country's economic development, Zhang said.

From the beginning of this year, the government waived the special agricultural product tax for rural people.

The so-called special agricultural product tax is a major tax item in rural areas, which is levied on rural people who produce almost all special local products ranging from fruits, flowers and mushrooms to aquatic products with an average tax rate of 8 per cent.

Peng Longyun, a senior economist with the Asian Development Bank, said the government is likely to spread the "tax-for-fee" reform initiated in early 2000 across the country next year.

"Rural people are only required to pay the agricultural tax after the reform," he said.

But if the government waives the tax, rural people's tax burden relative to agriculture production would be reduced completely, he said.

Zhang said exemption of agricultural taxes will not affect the country's fiscal stability but will greatly benefit agricultural development.

China is now practicing two different tax systems in rural and urban areas, which are considered unfair for rural people.

In cities, taxes are usually levied on net profits, not on costs. That's to say, a certain amount of costs would be deducted before the money earned by individuals or companies is taxed.

"The tax systems are unfair for farmers," said Ni Hongri, a senior researcher with the State Council's Development Research Centre.

If the tax departments set a tax threshold for farmers as they do for city dwellers, a majority of farmers would not need to pay taxes, Ni said.

A unified tax system is in line with the principal of fair tax for all people, both Zhang and Ni said.

(China Daily December 10, 2004)