‘High income’ definition causes debate
Finance and taxation experts have refuted rumors that individuals whose annual income is more than 120,000 yuan ($17,720) are in the “high-income group” and will be levied higher tax.
The rebuttal came after the rumors provoked heated public discussion.
A document recently issued by the State Council promoted increased income and reduced tax burdens for low and middle-income earners, as well as increased taxes for high-incomeearners.
However, the term “high-income group” mentioned in the document was said to be interpreted by the media as meaning “individuals whose annual income is more than 120,000 yuan ”, because it is the income standard used for the tax self-declaration system, according to current individual tax laws and regulations.
Although the Individual Income Tax Law and documents published by the Ministry of Finance and State Administration of Taxation use the term “high-income group”, there is no official definition of the so-called group.
Xinhua News Agency said on its Weibo account on Monday that several finance and taxation experts who work closely with the government organizations said that having an annual income of 120,000 yuan is not the boundary that defines the high-income group. Tax self-declaration of individuals whose annual income is more than 120,000 yuan was implemented in 2006, so it is “not anything new”, it added.
Moreover, “imposing higher taxes on the high-income group”, which has been supported by the public, was first mentioned by the Ministry of Finance in 2010 as a principle of individual tax reform for the 12th Five-Year Plan period (2011-15).
“I think the media misunderstood this issue,” said Zhang Lianqi, a financial expert who works closely with the Ministry of Finance. “The media stating that an annual income of more than 120,000 yuan is the definition of the term ‘high-income group’ is mere speculation.”
“It will take time for the individual tax reform plan to be introduced,” he added.
The State Council, China’s Cabinet, is planning to further lighten the tax burden on low- and middle-income people and moderately increase the tax on those with high incomes as a way to better regulate the country’s income distribution. Raising the incomes of poorer people and controlling excessive increases in the incomes of wealthy people would be a positive step toward expanding the middle-income group and promoting reasonable distribution of social wealth. However, the problem is what constitutes a high income. According to China’s extant law, people who make more than 120,000 yuan ($17,725) or more a year have a high income and have to report to the taxation authorities their incomes for tax purposes at the end of every year. So, the document issued by the State Council announcing its reform plan has sparked concerns about whether the country will increase tax on people with an income above this level.
Compared with the 2015 data released by the National Bureau of Statistics, which indicates the per capita wage of employees in surveyed units was 53,615 yuan, the 120,000- yuan annual income is not low. But for many white-collar workers, such an annual income merely makes their ends meet in big cities.
Against the backdrop of China’s steady economic growth, employees’ incomes are expected to further increase. Thus more people in big cities may see their annual income approach or exceed the 120,000 yuan threshold in a few years. But that does not mean all these people will have high incomes by that time.
Undoubtedly, a low threshold for defining a high income will extensively affect the middle-income group. The country should use a higher standard so that it has room to accommodate people’s incomes in the future. The efforts to build an olive-shaped society mean the country needs to extend more tax tolerance to the middle class.