China to cut taxes on poor, raise for rich

Legislation expected to pass shortly will cut taxes for China’s lowest income earners while raising it slightly for higher-income individuals, the Wall Street Journal reported. The new tax code would reduce the total number of income tax brackets to seven from nine. The threshold for the lowest tax bracket would be bumped to US$460 from US$305 today. Because the current bracket for 40% taxes will be phased out, individuals previously qualifying for that bracket will now pay the top rate of 45%. Individual income taxes made up just 6.8% of overall government revenue in 2010. This figure is far below that of most developed economies, partly due to pervasive tax evasion and partly for structural reasons. The law is currently under review by the Standing Committee and is expected to pass shortly.