China to raise minimum income tax threshold

BEIJING: China said on Wednesday it would increase the minimum threshold for income tax as Beijing tries to boost domestic consumption and narrow the country's widening wealth gap.

Shanghai, the country's financial hub, also said it would raise its minimum wage by 14 percent as authorities try to ease the impact of high inflation on the poor, which has fuelled fears of possible social unrest.

China's current threshold for personal income tax is 2,000 yuan ($304) per month. The country has nine income tax brackets and a maximum tax rate of 45 percent.

"In order to further reduce the tax burden on medium- and low-income people, it has become necessary to revise the personal income tax laws and increase the tax-paying threshold," the State Council, or cabinet, said in a statement.

Premier Wen Jiabao said Sunday "resolving unfair income distribution" would be a major objective of the 2011-2015 Five-Year Plan, the country's latest blueprint for economic growth.

The issue of fair income distribution "directly relates to social fairness and justice and the stability of the society," Wen said in an online exchange with Internet users.

Shanghai's minimum wage hike follows similar moves across the country as China's government tries to relieve pressure on households struggling to keep up with rising food and property prices.

The minimum monthly wage will rise to 1,280 yuan from 1,120 yuan, the city government said in a statement. It will take effect from April.

Inflation topped five percent in November for the first time in more than two years.

The latest official data said January inflation was at 4.9 percent, above the government's full-year target of four percent.

Ever fearful of inflation's historical potential to spark social unrest, authorities have already pulled on a variety of levers to try to rein in consumer prices and tame the red-hot real estate sector.

The government is especially keen to placate the public as it seeks to avoid the kind of unrest seen in countries across the Middle East and North Africa and that has toppled presidents in Tunisia and Egypt.

China has a huge floating population of more than 200 million low-income migrant workers toiling far from their homes and whom the government sees as a potential stability risk.