Tax changes will ease dependency burden

IN THE SECOND DRAFT of the Personal Income Tax Amendment published on Monday, the Standing Committee of the National People’s Congress, China’s top legislature, included expenditure on care for the elderly as a deductible item. Beijing News comments:

In the first draft of the amendment, the legislature suggested five expenditures that can be deducted from personal income before tax — education spending, further education spending, serious illness treatment spending, the interest on housing loans or rent.

In the second review, the expenses for supporting the elderly have been included in the list of deductible expenditures.

This not only responds to public expectations, but also adapts to social trends. Over the past decade, China’s demographic structure has undergone major changes. And a basic trend is that the population dependency ratio continues to increase. Which means that people are paying more to support the previous and next generations.

Not only is the cost of raising children a financial burden on families that needs to be eased, so too is

the spending on medical care and nursing services for the elderly.

If the amendment is passed, although there will still probably be an annual payment threshold of 60,000 yuan ($8,799) as the amendment suggests, the actual personal income tax burden will vary from family to family, which represents progress in the taxation system and reflects the government’s will to relieve the tax burden on lower- and middleincome earners.

Not surprisingly, the proposed deductible items have been warmly welcomed, as they promise to ease the tax burden on families. But there still needs to be some supportive policies, which might be more difficult to engineer than the law amendment, to objectively calculate taxpayers’ deductible expenditures and reflect their true financial burdens to translate the amendments to the law into tangible benefits for the people.