Society

More taxes coming as loopholes closed

By Chen Xin (China Daily)
Updated: 2011-04-19 08:56

BEIJING - The State Administration of Taxation has ordered its bureaus nationwide to strengthen their supervision of the collection of personal income taxes from high-earners.

The administration said in a statement on its website that it will be taking a close look at income from private business, the stock market, interest returns, dividends, bonuses and real estate.

And taxation authorities will be working more closely with various departments, including industry and commerce administrations, to improve the collection of taxes from the transfer of equity in both listed and non-listed companies.

"Taxation bureaus should also work closely with auction companies in order to acquire information about income derived from auctions and urge auction firms to pay taxes on behalf of their clients," the statement said.

People involved in real estate development, mine exploitation, private equity funds and trust investments have been listed as priorities over which tax collectors should keep a close watch, the statement said. It added that the authorities will also keep an eye on bonuses and subsidies collected by people working in lucrative businesses.

Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences, welcomed the tightening up by the State Administration of Taxation. He said there are still many loopholes in the taxation of the personal income of high-earners, especially income that is drawn from sources outside of their main line of work.

"This move can be deemed as a means to adjust income distribution and narrow the gap between rich and poor," he told China Daily on Monday.

Hu Yijian, a professor at the school of public economics and administration at Shanghai University of Finance and Economics, said the move might also be aimed at offsetting the anticipated decrease in personal income taxes collected from middle- and low-income people that would come from an expected reform of the personal income taxation system.

The country's top legislature is believed to be discussing a draft of an amendment to the Individual Income Tax Law and is thought to be about to raise the threshold for income tax payment from the current 2,000 yuan ($306) to 3,000 yuan.

"It is crucial to plug loopholes in collecting individual income taxes from high-earners to ensure a stable source of taxation revenue," Hu was quoted as saying in Dongfang Daily.

China began to levy individual income tax in 1980 with a threshold of 800 yuan. It raised the level to 1,600 yuan in 2006 and 2,000 yuan in 2008.

China Daily