Economic Watch: China's new tax brackets reduce individual, corporate burden
BEIJING, Oct. 1 (Xinhua) -- Millions of Chinese will see a notable decline in taxes on their pay this month, as new tax brackets went into effect.
Starting Monday, the minimum threshold for personal income tax will be raised from 3,500 yuan (about 510 U.S. dollars) to 5,000 yuan per month.
The adjustment was part of the revised individual income tax law adopted earlier this year, which made changes to the previous tax brackets and added special tax-deductible items, a move that analysts said would reduce the burden for individuals and companies alike.
Xu Luoqiang, a financial manager with Hitachi Elevator (China) Co. Ltd, said about 90 percent of the company's about 3,000 employees in Guangzhou will see lower taxes this month.
"I used to pay 1,000 yuan in taxes each month, now I only need to pay around 400 yuan after the adjustment," he said.
According to Song Leting, a financial manager with a commercial vehicle maker based in Guangxi, the revision is expected to cut total income taxes paid by the company on behalf of employees by more than 60 percent.
"The new law will be good for taxpayers to different extents, with middle and lower-income people benefiting the most," said Li Wanfu, head of the institute of tax science of the State Administration of Taxation.
Those whose monthly salaries range from 5,000 yuan to 20,000 yuan will see their tax cut by some 50 percent and those with monthly salaries ranging from 20,000 yuan to 80,000 yuan will see their tax lowered between 10 and 50 percent, according to the revision.
Individual income tax was the third biggest contributor to China's total tax revenue, following value-added tax and enterprise income tax.
Last year, China collected individual income tax worth nearly 1.2 trillion yuan, about 8.3 percent of the country's total tax revenue.
For many companies, lower income taxes for their employees mean that they will have incentives to work harder, and it will encourage the growth of the firms in the long term.
"With a higher minimum threshold for personal income tax, the working class will have more disposable income, reducing the labor costs of firms," said Gao Wei, a financial manager with a coal mining firm based in Shandong Province.
China has been cutting corporate costs through tax and fee reduction in a bid to bolster the real economy.
In August, a State Council executive meeting unveiled new measures that were expected to cut the corporate tax burden by more than 45 billion yuan this year.
While the hike in minimum threshold for individual income tax went in effect, the entire new law will come into force at the beginning of next year, which is expected to further reduce the individual and corporate burden.