Shi Langdu (
People’s Daily): Every time the cutoff point of personal income tax is raised, a new host of people stand to benefit. However, the ever-rising overall income level will gradually decrease the number of people benefiting from previous tax threshold increases. According to statistics from the Ministry of Finance, the government’s personal income tax revenues jumped by 18.6 percent year on year in 2017. The fact that the personal income tax increase overtook personal incomes reveals that Chinese people are becoming richer. But at the same time, it also implies that to make taxation a tool for balancing social wealth, the system of personal income tax must keep up with the times.
Seven years have passed since China raised the threshold for personal income tax. Every time, the cutoff point has been fixed based on full consideration of people’s expenditures on housing, education and medical care, so that their lives could be improved. This time, the newly-added deductible items such as education costs and medical fees for major diseases, are a big step forward and will surely cover larger groups of people, exempting more people from having to pay personal income tax.
One thing is certain, with fewer taxes to pay, people will have more money to spend. In this sense, a higher threshold for personal income tax will directly spur domestic consumption, indirectly boost the country’s employment and strengthen the mid-income class.
However, a higher cutoff point in personal income tax is not necessarily a good thing; there must be a balance between equality and efficiency. On the one hand, there should be equilibrium between the state treasury and individual wealth. The former backs a country’s overall development. To a certain extent, how to best spend tax revenues so that they can best benefit the whole population is even more important than taxation itself. On the other hand, in order for personal income tax to really help to adjust income distribution and narrow the gap between rich and poor and bolster social fairness, the cutoff point should be fixed in a way that will make middle- and low-income earners’ lives easier. Therefore, apart from a raised threshold for personal income tax, tax deductions and even a cut to the rate of indirect taxes are also very important.