China's Ministry of Finance has proposed to raise the minimum taxable personal income from the present 800 yuan to 1,200 yuan a month, falling short of most Chinese expectations of at least 1,500 yuan.

A source with the ministry said that a provisional personal income tax reform plan, drafted by the ministry, has been sent to the State Council for approval. "Because it is a transitional plan, we proposed the taxable benchmark at 1,200 yuan ," said the source.

Another ministry official told the Beijing-based Economic Observer that the transitional tax plan needs not to go through the legislation process by the National People's Congress.

The 800-yuan-a-month taxable income has been intact for 23 years, ever since its adoption in 1981. It has been censured nationwide for hurting the living standards of low-income families, if taking the inflation into account.

However, the ministry has been worrying that any rise of the personal tax rate will lead to loss in the State coffers. The taxation on personal income is rather a big revenue producer for the State.

Statistics issued by the Ministry of Finance showed that government levied 141.8 billion yuan (US$16.5 billion) on personal income in 2003, accounting for 6.5 percent of China's total tax revenue. In the first half this year, the State harvested 88.12 billion yuan of personal income tax, an increase of 20.6 percent compared with the same period last year.

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

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

Some luxury consumption items such as golf, bowling, sauna, played by the well-to-do, will be taxed.

Due to the various conditions in different provinces, the exact amount of income taxable remains under discussion. "We've agreed to set a uniform standard that is subjected to change according to the provincial conditions," said An Tifu, professor of the finance department from the Renmin University of China, "the fluctuation rate can be within 20 percent"

(China Daily August 19, 2004)