A seven-year-old tax on interest payments made on bank deposits should be dropped as it hurts the poor and no longer benefits the economy, a group of political advisors have told the government.

"Rich people with huge bank savings don't care much about the tax. But to people with middle and low incomes, the tax has really affected their interests," said Qin Xiao, one of 27 political advisors who submitted a proposal to deal with the problem.

"Given inflation and the interest tax, the real interest rate for bank deposits has almost become negative for individuals," said Wang Zhaobin, another political advisor and vice chairman of the federation of industry and commerce in Henan Province.

The current benchmark interest rate for one-year deposits is 2.52 percent, according to the People's Bank of China.

China began to levy a 20-percent tax on bank deposit interest in 1999 to reduce bank savings, boost consumption and curb deflation in the 1990s.

"But the macroeconomic environment has changed and China's economy has grown out of deflation. Therefore, to continue such a policy seems unnecessary," Qin said.

Renowned economist Wu Jinglian, also member of the National Committee of the Chinese People's Political Consultative Conference, said that the interest tax on savings has failed to reduce individual saving and had no obvious effects on stimulating domestic consumption.

A recent central bank report indicated that China's yuan saving deposits reached 15.97 trillion yuan (US$2.05 trillion) at the end of November last year, up 15.3 percent year-on-year.