China raised the IncomeTax exemption limit for individuals earning 5000 Yuan a month to 10,000 Yuan a month. Dong Mingzhu, one of China’s richest women and Chairperson of Gree Electric Appliances with annual sales of 200 billion yuan (US$30 billion), has consistently and publicly pressed the Chinese government to reform its regressive and much-maligned personal income tax regime by hiking the tax-free threshold so that most Chinese don’t have to pay income tax. A number of influential Chinese tycoons including Xu Jiayin, Chairman of Evergrande Group and Cao Dewang, Chairman of Fuyao Group, made similar appeals around the time of the NPC’s annual sessions. In addition to arguing that raising the tax-free threshold helps boost spending power and consumption, they also argued that personal income tax contributes only about 6.5 per cent of China’s total tax revenues, so the net effect on the country’s fiscal situation would not be serious if the contribution were further reduced.

(Comment: The last time the tax-free threshold was raised was in October 2018 when it was raised from 3,500 yuan to 5,000 yuan a month, or 60,000 yuan a year. As a result, the number of people liable for income tax was estimated to have fallen to 64 million, about 15 per cent of the labour force.  In reality, of the 64 million people liable for income tax, the number of the people who actually pay any tax is even smaller because of tax evasion and under-reporting.)

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