(Yicai Global) Oct. 22 -- China has issued a draft plan for personal income tax cuts that includes six more special tax-deductibles and is soliciting public feedback.
Unveiled jointly by the finance ministry and state tax administration on Oct. 20, the plan proposes additional deductions for expenses on child and adult education, serious disease treatment, mortgage interest, rent and elderly care.
Taxpayers supporting parents aged 60 or more would qualify for a monthly CNY2,000 (USD286) deduction. For children's education and interest on loans for first-time home buyers, a fixed amount of CNY12,000 (USD1,730) is allowed each year. For adult education, an exemption of between CNY4,800 and CNY3,600 applies based on differing categories. The deduction for housing rents varies between cities from CNY8,000 to CNY14,400 each year.
China cut the income tax burden on individuals from Oct. 1. The personal income tax-free threshold has risen to CNY5,000 a month from CNY3,500, and a new seven-level progressive tax rate was introduced, greatly easing the tax load on the less affluent.
"Employees of companies and public institutions will find different levels of tax cuts from their wage statements in October; these will be more apparent for low- to mid-income earners," Luo Tianshu, director of the income tax office under the State Administration of Taxation, said at recent press conference.
Taxpayers will get a further boost from cuts with further special deductions introduced next year, which will spur consumption and boost domestic demand, a number of tax experts told Yicai Global.
The challenges and risks of implementing these deductions are effective administration and supervision via information exchange and sharing between departments, said Zhu Jinhua, managing partner with the individual income tax division at PricewaterhouseCoopers China.
Tax authorities can learn from other regions and countries, and selectively review the deductions via technology and big data analysis, broaden taxpayer education and publicize the duty to truthfully declare, while severely sanctioning scofflaws who refuse to provide information or supply false data.
Editor: Ben Armour