Monday, April 25, 2011

China's Inflation is Soaring; CPI +5.4%, 32 Month High; Chinese Want Income Tax Cuts To Deal With Costs

China Daily newspaper reports today an interesting notion that residents in large Chinese cities have with regards to the rising inflation. They hope to see cuts in personal income tax to cope with rising prices.
More interestingly, the "Standing Committee of the National People's Congress" (NPC), which is China's top legislature, has actually reviewed a draft amendment to theirs Personal Income Tax Law " in a move to narrow the income gap and offset the effect of rising living costs".

This draft increases the minimum threshold for personal income tax from 2,000 yuan (about $307) per month to 3,000 yuan, and cuts the number of income tax brackets from nine to seven.
A survey of 282,000 Internet users showed 98.1% supported lifting the threshold. Since these are taxes, we wonder who would not support such measure.
China's consumer price index (CPI), a main gauge of inflation, rose 5.4% in March from one year ago, a 32-month high.

Food prices surged 11%.

China currently uses a nine-bracket progressive rating system, and the draft will eliminate the 15 and 40 percent tax rates.

"According to the draft, the minimum tax rate of 5 percent will be applied to those whose monthly salaries range from 3,000 to 4,500 yuan, compared to the current 2,000 to 2,500 yuan. Also, the peak rate of 45 percent will apply to those who make more than 80,000 yuan per month, instead of the current 102,000 yuan".

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