A Chinese expert has suggested that tougher laws be enacted to penalize tax evaders and more taxes be levied on the rich to ensure the success of personal income tax reform.

In an article published Tuesday by China Securities Journal, Gao Huiqing, an expert with China's State Information Center, said that personal income tax reform will be "empty talk" if the government cannot make the rich pay more taxes based on their real income.

He also suggested implementing a so-called "sunlight bill" and publishing each person's income tax information to make tax evasion difficult.

The central government recently proposed to hike the personal income tax from 800 yuan (98.8 US dollars) to 1,500 yuan (185 dollars). The first-ever legislative hearing was held on Tuesday by the Standing Committee of the National People's Congress, China's top legislature.

He believes that even the proposed cutoff point of 1,500 yuan, which is the Chinese average income, is too low.

Based on China's current economic growth, Gao says, by 2009, Chinese urban and township families' average expenditure on food, clothing, medical care, telecommunications, entertainment and education will surpass 1,500 yuan. This will push the average monthly income to 2,250 yuan (277 dollars), much higher than the taxation cutoff point.

Besides, he holds that it is "unreasonable and unfair" to implement a unified personal income tax across the country as big a as China.

Moreover, citizens in developed provinces and municipalities enjoy a higher income, while those in less developed western part of China have a lower income.

Beijing has actually adjusted the personal income tax from 800 yuan to 1,200 yuan. Guangzhou and Shenzhen in south China have raised the cutoff point to 1,600 yuan.

For local governments in less developed areas, the proposed personal income tax reform means that they will have less financial revenue, Gao acknowledged. This will not be helpful to the development of these areas.

The personal income tax reform is aimed at helping build a "harmonious society" and stimulating domestic consumption. The lifting of the taxation cutoff point will benefit the low and mid-income groups, Gao says.

He estimates that more than 24 billion yuan (2.96 billion dollars) of personal income taxes will be exempted from the low and mid-income citizens next year if China is to implement the new policy from the beginning of next year.

Although the sum seems insignificant in terms of the macro economy and it can only push up domestic consumption by 0.1 percentage points, the benefit of the tax reduction will be remarkable on the long run due to the multiplier effect, he concluded.

Source: xinhua