China's parliament has drafted a new plan to lower taxes for most individual taxpayers in a bid to stimulate economic growth by boosting personal income and spending, the Financial Times reported July 2.
The plan proposes to lift the minimum threshold for individual income tax to $9,000 per year from $6,300. It will also expand coverage of the three lowest tax brackets of 3%, 10% and 20%, effectively reducing the rates for millions of individual taxpayers. The maximum threshold for the 20% bracket, for example, was almost tripled to $45,000 a year from $16,000.
The draft version of the tax changes will be available for public comment until July 28, with the final version expected to take effect in October, the FT said.
The tax cut is not expected to have a major impact on China's fiscal budget since the $180 billion in individual income taxes collected in 2017, in current exchange rates, accounted for only 8% of total tax collections. Value-added taxes held the largest share of Chinese tax revenue at 39% of the total, while corporate income taxes represent 22%, the FT reported.
The new tax plan also pushes for more measures to combat tax evasion, including a more robust real estate tax collection and preventing the use of offshore tax havens.