Top lawmakers have decided to hold their first-ever public hearing, making the ongoing personal income tax reform an important milestone in legislative progress.
Given its wide implications, this reform is an ideal choice for the introduction of transparency and democracy in the country's lawmaking.
But to move ahead with the belated reform, legislators should come up with clear-cut goals before listening to different views.
On Sunday, the Standing Committee of the National People's Congress announced that a public hearing would be held later next month to debate the proposed amendment to the personal income tax law.
The involvement of public opinion in legislation surely represents an encouraging departure from the old practice largely led by government departments.
In the case of an income tax reform that will redraw the lines between the government and every individual taxpayer, a thorough consideration of opinions from all sides is a prerequisite for effective legislation.
But the legislators' refusal to endorse the draft amendment has shown the splits in our society on the matter of tax reform.
Consensus has already been reached on the necessity of urgently raising the threshold for the payment of personal income tax.
This tax was introduced about a quarter of a century ago when the country was just beginning its transformation from a centrally-planned system to a market economy.
With a threshold of 800 yuan (US$98.60), only the top 1 per cent of wage earners was taxed in the early 1990s. Yet, last year, the country's personal income taxes reached 170 billion yuan (US$21 billion), with 65 per cent being collected from salaried workers.
As rapidly expanding national coffers finally persuaded the government to address the obsolete personal income tax situation this year, the nation remains divided on how the reform programme should be carried out.
Fairness should surely be the chief principle. But the widening income gaps between regions, and urban and rural areas, have made it impossible to find a one-size-fits-all solution.
A nationwide blanket exemption threshold has given rise to strong complaints from those in rich regions for not taking high local living costs into consideration.
On the other hand, a higher threshold for developed areas will result in still a lighter tax burden for the relatively well off.
Both arguments are valid for different sections of the population. It is believed the scheduled public hearing will help shed light on the underlying problems in the central and local governments' redistribution work.
A functioning central fiscal system could help offset the disadvantages of underdeveloped areas if developed areas are subject to a higher tax threshold. Sensible reallocation of public finances by local governments will help enable low-income earners to lead better lives in major cities.
The complexity of the tax and fiscal systems means they cannot and should not be expected to be overhauled overnight.
A pressing task is building on the current enthusiasm from all sides to strive to take concrete action.
Though the proposed blanket rise of the threshold to 1,500 yuan (US$185), or an even higher rise, will not satisfy everyone, it should help redistribute wealth fairly to some extent.
Only when the outmoded personal income tax threshold is updated will we be able to begin to tackle more complicated problems.
(China Daily August 30, 2005)
