THE Standing Committee of China’s National People's Congress (NPC) has agreed to raise the personal income tax threshold by more than previously proposed by the government, but not by as much as had been expected after the comments received in a public consultation.

It has been decided that, with effect from September 1 this year, the personal income tax monthly threshold will be increased to RMB3,500 (USD540), from the current level of RMB2,000. In addition, the lowest rate of personal income tax has been reduced from 5% to 3%.

The government had proposed raising the threshold to only RMB3,000, while almost one-half of the replies received by the NPC in the consultation suggested that it should be increased to RMB5,000 if the government wanted to have a measurable effect on the living standards of the poorest citizens, who have been hit by rising inflation.

However, the NPC said that the approved increase, which was “necessary and timely”, would reduce the tax burden on people with low incomes and would also help to control the growing wealth gap in the country.