China Proposes to Push Personal Income Tax Reform Via Nationwide Roll-Out of Health Insurance Pilot
Zhang Xia
DATE:  Sep 01 2017
/ SOURCE:  Yicai
China Proposes to Push Personal Income Tax Reform Via Nationwide Roll-Out of Health Insurance Pilot China Proposes to Push Personal Income Tax Reform Via Nationwide Roll-Out of Health Insurance Pilot

(Yicai Global) Sep. 1 -- China aims to step up its reform of personal income tax (PIT) policies by implementing its commercial health insurance PIT deduction pilot scheme on a nationwide scale, according to a proposal made at the 29th meeting of the Standing Committee of the 12th National People's Congress on Sept. 1. The committee also suggested reforming commercial long-term care and health insurance.

The commercial health insurance PIT deduction pilot allows taxpayers to claim up to CNY2,400 (USD365) per annum as deductions in respect of premiums paid for qualified commercial health insurance products. The incentive system has been piloted in 30 cities including Beijing, Shanghai, Tianjin and Chongqing.

The country should get tougher on tax enforcement for online businesses, said committee member Che Guangtie, especially due to the serious challenges associated with taxing sales revenues generated on the internet.

The government should adjust taxation policies to cover internet-based sales activities, which will encourage the healthy development of online commerce, he added.

Personal income tax revenues grew 18.5 percent during the first seven months of this year, far outstripping the 7.3 percent increase in per-capita disposable income recorded for the first half. This triggered renewed calls for reforming the personal income tax system.

With the existing PIT system, different types of income are classified into different categories, and taxes are collected and settled accordingly. Penalizing low-income people in China has been a subject of criticism.

The system also fails to allow for differences in household-spending among taxpayers, and is not linked to price indices and changes in the average wage level. Instead of safeguarding fair distribution of revenue, it has widened the gap between the rich and the poor.

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