CRI听力:Structural Tax Cuts Needed for Distribution Reform

China's structural tax cuts have begun to show effects in every corner of the country – not only benefiting private businesses, but also easing the wealth gap and boosting consumption power.

Experts say the fiscal policy, particularly tax collection, could and should play a significant role in the income distribution reform.

An Xiumei, a professor at the Finance and Public Management School with Central University of Finance and Economics echoes the call for a general reform.

"We need to solve the income distribution problem at the initial stage when the market begins to allocate resources. To really make tax policies a powerful tool, it requires an improvement of our taxation system, especially in the categories of business income taxes, gift taxes plus fiscal transfer payment."

Since 2002, per capita income growth of Chinese residents has lagged behind the growth of government fiscal revenues. The average per capita tax for each Chinese by the first half of this year was 4-thousand and ninety-nine yuan, equivalent to 24.2 percent of the GDP. The optimal tax ratio suggested by the World Bank is around 23 percent for middle income countries like China.

Professor An says there is leeway for personal income tax reduction.

"Personally I think the previous moves to raise the personal income tax threshold have appeared to be cautious, even the lowest rung of the income-tax ladder has been raised from 2-thousand yuan per month to 3-thousand-five hundred. It feels like a big jump but given the income level and living costs now, the exemption line is rather low."

Meanwhile, Wang Weiqing,council member of the China International Taxation Research Institute adds equality should be emphasized.

"First, strengthen the collection of high income earners because now the main income for many of them comes from sources other than salaries. Second, we could adjust the tax bases, shifting from the current individual base to a family unit."

Zhang Monan,with the State Information Center, hints that a 4-thousand to 5-thousand 5-hundred exemption level might be more suitable and is likely to happen soon.

Meanwhile, she notes that spending power and sustainable economic growth will also be boosted by the structural tax cuts.

"The current tax reduction for a new energy vehicle favors policies tailored to consumers' demands. In the future, we could expand it to innovative products and industries, especially for firms that have their own intellectual property rights. Then their tax burden would be greatly relieved. And it would also spur consumption and stimulate demand."

Experts say China needs to release its consumption potential in order to shift from an investment-driven economy to the one with a more sustainable growth pattern.

For CRI, this is Shen Ting.