Will China cut personal income taxes as part of its stimulus drive?

Ex-officials and scholars have suggested China should further cut personal income tax as part of its stimulus package

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A Meituan delivery worker picks up a food order at a shopping mall in Beijing. Photo: Reuters

Published: 7:00am, 29 Oct 2024Updated: 10:35am, 29 Oct 2024

With former US president Donald Trump flagging the possibility of ending federal income tax during his campaign last week, there are also rising calls in China for personal income tax cuts as part of Beijing’s stimulus package.

China is racing against time to battle weak domestic demand and consumer confidence amid efforts to achieve its annual economic growth target of “around 5 per cent”.

During a round-table discussion earlier this month, Sheng Songcheng, former head of the People’s Bank of China’s statistics department, suggested further raising the personal income tax threshold and reducing the tax rate for low-income groups.

The personal income tax threshold should be raised from 5,000 yuan (US$702) a month to 8,000 yuan per month to unleash consumption potentials, according to his proposal.

The increase would only make the government lose out on 30 billion yuan (US$4.2 billion) in tax income a year – or less than 0.2 per cent of the total – representing a “trivial amount”, added Sheng, who is now a professor at the China Europe International Business School in Shanghai.

China last revised its tax-free threshold in 2018, when the limit was raised from 3,500 yuan a month.