Experts refute reports of tax increase for 'high income group'

Chinese 100-yuan notes Photo: Bloomberg

Chinese tax experts have criticized various domestic media for reporting the Chinese government is planning to impose higher personal income tax on the "high income group" earning more than 120,000 yuan every year.

Zhiwei, a public opinion analysis platform in China, compares the groundless reports to a pure "farce", which is caused by public misinterpretations about a Chinese Business Journal (CBJ) article categorizing taxpayers with annual income of more than 120,000 yuan as highly paid people, a classification the article said is based on China's current tax system. The CBJ report also said that a consensus had been reached to gradually increase personal income tax levied on the high income population.

Public fears over tax hikes for people earning more than 120,000 yuan per year emerged after China's State Council released a document on income distribution reform. The Chinese cabinet stated in the document that taxation adjustment would be made to narrow the large income gap between different groups, but it did not specify 120,000 yuan as a gauge to define the high income group.

Why 120,000 yuan?

Tax experts said that a major reason why many Chinese people see 120,000 yuan as a threshold for high income club lies in a taxation regulation amended in 2005 which stipulated that taxpayers with annual income of more than 120,000 yuan were obliged to voluntarily file and pay personal income tax.

"In the circulation of the (false) messages, highly paid taxpayers were considered by mistake as the group of people with annual income of more than 120,000 yuan. And taxation adjustment was misinterpreted as tax hikes...That is a pure rumor," said tax expert Xu Zhancheng.

People who earn annual income of more than 120,000 yuan is just a key target of China's State Administration of Taxation, which routinely publishes annual documents on tax declaration work, according to Xu.

"It is a common place that many taxpayers with annual income of more than 120,000 yuan have voluntarily filed and paid personal income tax in recent years," noted Xu.

The tax expert also stressed that any move to increase taxes must be discussed and approved by the National People's Congress (NPC), China's top legislature, before becoming a law.

Lack of a sense of security

However, the rumor still raised a wave of complaints among Internet users, who believe that earning an annual salary of 120,000 yuan is not enough for them to make a living in China's big cities such as Beijing and Shanghai, especially for the migrant workers annoyed by the rising housing costs and commodity prices in the first-tier cities.

"With an annual income of 120,000 yuan, can we buy one square meter of an apartment in Beijing, Shanghai and Guangzhou?" satirized a Sina Weibo user.

An author said in an article published on a WeChat public account that the best tool to test one's financial capacity is to link what he/she earns a year with property prices, referring to China's soaring property prices.

According to statistics from the Beijing Municipal Human Resources and Social Security Bureau, the average annual wage of Beijing workers reached 85,038 yuan in 2015, with an average annual growth of about 7 percent. Based on this salary growth rate, a worker who is able to earn 120,000 yuan a year in Beijing cannot afford to buy a house in the Chinese capital within 20 years.

"There is only 2000-3000 yuan left every month after deducting personal income tax, social security fund and money spent on daily use," said a young migrant worker who earns 10,000 yuan a month in Beijing.

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