Rachel Hou/Shanghai Daily news

The reform in the personal income tax system has become the focus of media attention since the proposed amendment to the personal income tax law was submitted to the National People's Congress (NPC), China's highest legislative body.
We have compiled, from Chinese news media, three issues that are dominating the current income tax debate.

*Is the proposed income tax threshold too low?
Although the draft amendment nearly doubles the threshold from the present 800 yuan (US$98.76) to 1,500 yuan, some complain the tax burden will remain heavy for low- and middle-income families. According to the National Bureau of Statistics, per capita consumer expenditure of urban employees reached 1,143 yuan in 2004. As well, housing, children's education and medical costs all require additional expenditures. In view of this, NPC delegate Wang Ruzhen recommends a tax-free threshold of 2,000 yuan. Xia Yeliang, a professor at Beijing University, said the threshold should be raised to 5,000 yuan at least.
The ratio of the minimum tax level to the average salary is also cited in argument. The current tax-free threshold (800 yuan) was set in 1993, when the average monthly income of salaried workers was about 270 yuan. The minimum salary for paying tax was nearly three times the average salary at that time. In 2004, China's average monthly income of salaried workers reached 1,335 yuan. Should the ratio be maintained, the new threshold would be raised to 4,000 yuan.
Advocates for the proposed threshold, however, argue that a higher starting point will cause large tax revenue losses for the country. Even the proposed 1,500 yuan threshold translates to 20 billion yuan in lost revenues.

* Will the country allow different thresholds for different regions?
Considering the unbalanced nature of China's economic growth, some experts suggest a higher income-tax threshold in affluent areas. They note the cost of living in cities like Guangzhou and Shanghai is much higher than undeveloped ones. "In Guangzhou, life is not easy for those who earn less than 4,000 yuan per month," said Xie Xianxing，a professor at Sun Yat-sen University. 
Others insist on a unified threshold across the country. "The logic behind the plan for different thresholds is faulty. The fairness of the income-taxation policy is reflected in a unified threshold, " said Qiao Xinsheng, a professor at Zhongnan University of Economics and law. He is concerned that the problem of brain drain may worsen in undeveloped regions due to the different thresholds.

* How to make the rich pay their fair share?
Loopholes in the country's income taxation system enable the very wealthy to easily evade taxes. According to the National Bureau of Statistics, 65 percent of all the income taxes collected by the country last year was from ordinary wage earners.
Hopefully, the rich will receive stricter regulations from the government if the amendments to income tax law, which require high-income earners to file tax reports to the authorities regularly, are approved. The "high earners" were defined by the State Administration of Taxation as company owners, pop stars, lawyers, accountants, auditors, university teachers, etc.
Currently, most Chinese mainland companies report to authorities the total taxes paid by all employees and do not break down the figure to the individual level. As a result, it is hard for the government to track the tax payment histories of individuals.