The newly released draft plan to increase personal income tax deductions as part of an overhaul of China’s income tax laws will ease individual burdens and exempt major expenditures from the country’s tax base.
China in August passed changes to its tax laws, raising the threshold of individual income tax, and also allowing for deductions on certain expenditures. The draft rules released on Oct 20 is the latest move by Chinese policymakers to cut taxes for companies and individuals in the hopes of spurring growth.
“We now have two parents and a child. Expenditures on them account for over half of our income,” a resident in Beijing said, while their burden will be greatly solved on grounds of the draft rules would cover costs including education, healthcare, mortgage interest, rent and alimony for parents.
According to a tenant spending about 3,000 yuan on rents each month in Beijing, 800 to 1,200 yuan can be exempted per month from the tax base with the new rules taking effect.
“The published standard is much looser than we have expected,” Sun Gang, a fellow at the Chinese Academy of Fiscal Sciences (CAFS) said, noting the government just asks for some simply acquired information to make the process more convenient.
In addition, Ma Jun, the policy adviser for the People’s Bank of China (PBOC) held that China’s anticipated tax cuts next year could exceed the equivalent of one percent of GDP, or about $120 billion, and it would in aggregate, likely be greater than recent US tax reductions.