Chinese Legislators Call for SME and Worker Income Tax Cuts

Posted by Reading Time: 2 minutes

Sept. 2 – Several senior mainland legislators called for national tax cuts to be realized at the fourth session of the NPC on Friday, recommending that monthly individual income tax barriers be raised.

Currently, workers in China pay income taxes on everything earned above RMB2,000 a month. Zheng Gongcheng, an NPC Standing Committee Member and noted academic on labor issues said that the mainland’s individual income tax threshold was too low, resulting in lower income workers unfairly carrying the burden as the main source of personal income tax revenue. He also pointed to the fact that low income workers have seen the prices of commodities such as pork rise considerably the past 12 months.

On top of the recent cuts on administrative fees for individual-owned businesses, Zheng called for a further reduction in administration costs and taxes for Chinese SMEs, especially for labor intensive manufacturing plants.

The call was taken up by several other prominent NPC members, including the minister of agriculture, Sun Zhengcai, and comes in the wake of an expected decrease in the amount of crops planted by China’s farmers in light of increased commodity and production costs as well as pressure on SMEs which now face problems with inflation and an expected global economic slowdown.

Such a move, if the economic situation does not improve, may well occur soon. The Chinese government is extremely sensitive to the mass population’s requirements, and does not want to see social unrest should commodities prices remain high. Subsidies for farmers are almost certain to be extended this year to ensure a better chance of crop success for the 2009 harvest, while a move to increase the income tax threshold also cannot be ruled out.

This all could lead to an individual income tax threshold rise of 10 percent to RMB2,200 a month implemented in November.