China planning fairer income tax policies: Finance Minister

China's Finance Minister Lou Jiwei looks at his watch as a journalist (front) raises a hand to ask a question during a news conference, as a part of the National People's Congress (NPC) in Beijing, March 6, 2014. -- PHOTO: REUTERS
China's Finance Minister Lou Jiwei looks at his watch as a journalist (front) raises a hand to ask a question during a news conference, as a part of the National People's Congress (NPC) in Beijing, March 6, 2014. -- PHOTO: REUTERS

Beijing is mulling how to make individual income tax policies fairer in order to ensure equitable income distribution, China's Finance Minister Lou Jiwei said on Thursday.

Premier Li Keqiang has pledged to "declare war on poverty", make taxes more progressive and improve people's livelihoods, amid rising rich-poor gaps which saw China's Gini coefficient - a measure of income inequality in a country - reach 0.473 this year.

A reading higher than 0.4 is deemed by the United Nations to represent higher risks of social conflict as disparities rise.

Expectations that China could revise its individual income tax regime - in particular, exempting more lower-income people from taxes as costs of living climb in China - have risen after some Chinese legislators called for a review in recent months.

But Mr Lou stressed on Thursday that "simply raising the income tax exemption floor of 3,500 yuan (S$725) would not be fair".

Such a blanket rule would not take into account the disparities between different households' expenditure.

"A person who earns 5,000 yuan...may live quite well, but a person who has to raise a family on 5,000 yuan will face difficulties," he explained.

So the next step for Beijing is to create a consolidated income tax regime that takes into account each household's basic expenditure needs and their earnings.

Factors to consider would include how many family members the tax-payer supports, education loans and mortgage burdens on their first or only home.

Mr Lou was speaking at a press conference on the sidelines of the annual parliamentary meetings which opened on Wednesday.

graceng@sph.com.sg

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