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Govt mulls ways to narrow income gap

2013-02-07 09:21 Global Times     Web Editor: qindexing comment

China's newly released income distribution plan is an important step toward narrowing the country's wealth gap, but more specific rules and measures will be needed, analysts told the Global Times Wednesday.

The State Council, the country's cabinet, unveiled a notice late Tuesday covering 35 items including the general target of enlarging the number of middle-income residents.

"It is a solid step toward narrowing the income disparity," Zheng Xinye, a taxation professor at the School of Economics at Renmin University of China, told the Global Times Wednesday.

One of the key parts of the notice is a plan for reform of the taxation system, an area where there is plenty of room for improvement, Zheng said.

The government will develop its tax submission system, and taxpayers with high incomes will not only see taxes deducted from their salaries paid by their employers - they will also need to pay taxes directly to the taxation bureau if they receive income from other sources, according to the notice.

A similar regulation has been in place in China for two decades, but high-income residents have little motivation to pay taxes directly to the taxation bureau, "mainly due to a lack of strict punitive measures for violation of the regulation," Zheng noted.

The notice also said that property tax would be extended to cover more areas across the country.

Potential expansion of the pilot property tax programs to more areas has been a hot topic ever since Chongqing and Shanghai launched the program in 2011.

Zheng noted it would be difficult to expand the pilot program nationwide in the short term, partly because it would be very complicated to calculate the exact amount of the levy and assess the value of the properties involved.

Zheng also said that the notice is just a general guideline, and more details need to be released in the future, such as when and how to impose inheritance taxes in China, which would also be helpful to narrow the wealth gap.

The notice revealed that State-owned enterprises (SOEs) will need to pay 5 percentage points more of their capital income, part of which will go toward helping poorer people.

Currently, the SOEs have to pay 5 to 15 percent of their capital income.

But Gan Li, director of the Survey and Research Center for China Household Finance under the Chengdu-based Southwestern University of Finance and Economics, told the Global Times that "5 percentage points extra is still too little."

In 2010, Gan's institute published its own Gini coefficient, an index to measure income inequality.

The reading was 0.61, indicating a wider wealth gap than the figure of 0.474 that was recorded in 2012 by the National Bureau of Statistics, and higher than the globally recognized warning level of 0.40.

The People's Daily said in a commentary Wednesday that coordination of different parties' interests will be involved in the reform, which will be "hard and complicated."

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