The central government will exempt agricultural tax for farmers in 2006, two years ahead of schedule, Premier Wen Jiabao announced in Beijing on Saturday in his annual government work report to the country's top legislature.
"Revenue decreases in local budgets incurred as a result of taxes reduced or exempted on agriculture and livestock will be offset principally by transfer payments from the central government," the premier said in his report.
This will involve an additional 14 billion yuan (US$1.7 billion) from the central budget this year and will bring the total expenditure to 66.4 billion yuan, he added.
The government first declared to phase out the centuries-old levies last year.
To date, 26 of China's 31 provinces, municipalities and autonomous regions have already announced the termination of all agricultural taxes before the end of this year, when about 730 million farmers will be relieved from the levy, says Fan Xiaojian, vice minister of agriculture.
The five localities that will continue to charge agricultural taxes, including the provinces of Hebei, Shandong, Yunnan and Gansu, and the Guangxi Zhuang Autonomous Region, will reduce taxes at least 2 percent this year, according to Fan.
For centuries, farmers paid taxes based on the number of family members and cropland acreage. The end of the levy is good news.
"In Jilin Province, the tax exemption released farmers from 1.4 billion yuan last year, an average of 100 yuan per farmer," said A Nuhan, an official from the Mongolian Autonomous County of Qian'an in the province.
Besides the tax exemption, the central government has also worked out a series of other agriculture-friendly policies to boost the rural economy and increase the income of farmers, including a direct subsidy for grain growers and more subsidies for farmers to buy improved crop strains, agricultural machinery and tools.
Statistics show these preferential policies brought 45.1 billion yuan of direct economic gains to the nation's 900 million farmers last year. The National Statistics Bureau acknowledged the average income for China's farmers rose 6.8 percent in 2004, the highest in seven years.