Far-reaching review in tax policies
Print Edition
China will move toward a comprehensive individual income tax system based on household salary and assets because the current tax policies are flawed, Minister of Finance Lou Jiwei said yesterday.
Lou made the comments following reports that couples in some cities divorce to avoid a 20 percent tax on profit when they sell a second property registered under the owner.
After couples divorce, one of them can sell their second apartment tax-exempt because this home is deemed as his/her first apartment. After the transaction is done, they remarry.
“Any policies that could result in a tragicomedy are flawed,” Lou briefed reporters during a National People’s Congress meeting. “We will consider collecting individual income tax on a family basis as we shift toward a comprehensive tax system in the next step of reform.”
As for individual income tax on salaries, Lou said that a comprehensive system is also needed as it’s not fair to further raise the threshold.
“A monthly salary of 5,000 yuan (US$817) is fairly good for people living by themselves but it is rather difficult if he/she has a child to raise,” Lou said. “We should count income comprehensively and consider people’s expenses at the same time.”
He said the ministry will consider offering tax rebate for expenses to care for parents and children, education, and mortgage on first home.
Lou said he expects small businesses and the service sector to still expand in China this year and create more jobs.
“Such is healthy job creation. We also believe consumer prices won’t rise if monetary policies are kept on hold,” Lou said.
“It is not very important whether the actual growth this year is lower or higher than 7.5 percent,” he said, referring to this year’s economic growth target unveiled by Premier Li Keqiang on Wednesday.
Economists see “breakthroughs in budget and tax reforms” this year leading to more transparent disclosure of the government budget, introduction of resource taxes, and better consumption taxes.
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