China Plans Middle Class Tax Slash

After retail sales slumped in May, China is coming out with a tax cut plan.

SCMP: China set to cut tax rates for middle classes in bid to stimulate consumer spending

As well as raising workers’ monthly personal allowance to 5,000 yuan (US$775) from 3,500 yuan, the changes will make interest payments on mortgage loans, and education, training and medical expenses tax deductible.

The proposals have already been drawn up and are expected to be endorsed by the National People’s Congress, China’s legislature, this week, Xinhua reported.

The changes come at a time when consumer spending is under serious pressure – retail sales in May slowed to their lowest level in 15 years – as Chinese households feel the pinch of rising mortgage bills and falling wages.

At the same time, the government’s revenue from personal income tax in the first five months of the year rose 20.6 per cent from the equivalent period of 2017.

ECNS: Proposed tax cut to ensure fairer income distribution in China

"This is the first time that special expense deductions have been introduced in China's individual income tax system," Liu said, adding that they adhere to the basic principles of individual income tax and are helpful for a fair taxation system.

The changes are conducive to reducing tax burdens for taxpayers, raising people's income and boosting consumption.