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Higher tax rates on high earners? Rumors busted


10-26-2016 05:09 BJT

Chinese social media platforms were sent into a frenzy over rumors of higher tax rates recently. Reports had suggested that higher rates could be imposed on high earners, as a result of forthcoming reforms. The country's financial and taxation departments have now dispelled that rumor.

"A higher rate would apply to those earning at least 120-thousand yuan, or about 18-thousand US dollars a year." The reports went viral on the country's social media platforms. Authorities say that threshold for higher tax rates in the future is not true.

"The alleged '120-thousand yuan' is just mentioned in the income declaration policy -- it has nothing to do with the threshold to define a high-income group," Liu Shangxi, director of Research Inst. for Fiscal Science, Ministry of Finance, said.

Since 2006, Chinese citizens have been required to declare their incomes if their annual income is above 120,000 yuan. And authorities say even that number is too low now.

"It has been 10 years since we set the income declaration policy in 2006. And the policy was just set to accumulate experience for the income tax reform. In ten years' time, the number of those who earn more than 120-thousand yuan has already increased several-fold, so it could hardly be a threshold to define high-income earners," Li Wanfu, director of Taxation Science Research Inst., State Administration of Taxation, said.

So whether there will be a clear standard to define high-income earners in the future? Authorities say it's hard to come out with such a standard.

"The income gap is wide between different regions across the nation, so it would be very difficult to define such a threshold merely with a number. It requires the consideration of so many factors. And any change in the income tax law needs to pass through the legislative process of the National People's Congress," Li said.

Though the rumors have been busted where this round of tax reform will go and how the tax policy will change, remain major concerns for many people.

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