Tax hike for China's high income group 'pure rumor', state media says

October 24, 2016 7:15 AM EDT

Shoppers wait outside a Burberry store at Causeway Bay shopping district in Hong Kong, China, July 16, 2015. REUTERS/Bobby Yip


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BEIJING (Reuters) - China's state news agency Xinhua denounced various domestic media for reports saying the government planned to increase income tax for the country's "high income" population, citing multiple official sources in a weibo post on Monday.

Speculation was rife over the weekend that China would levy heavier tax for the "high income group" whose annual wages exceed 120,000 yuan ($17,722), after the state cabinet released a document on income distribution reform, noting it would use taxation to narrow the income gap between different groups.

"That is a misread, a pure rumor," unnamed experts from the finance ministry and tax bureau were quoted as saying, stressing that 120,000 yuan is not the standard used to define the high income group, and that the document doesn't mean the government will increase tax.

Xinhua said that tax payers with annual income of more than 120,000 yuan, which includes various sources such as salary, stock dividends and rental returns, have been obliged to voluntarily file and pay income tax since 2006, which is "nothing new".

But those media reports have triggered a wave of criticism on China's social media sphere, as many netizens responded furiously claiming the alleged threshold is set too low, especially considering China's first-tier cities' soaring living costs.

"Just an annual income of 120,000 yuan will give you high income status? Can you buy even one square meter of apartments in Beijing, Guangzhou or Shanghai?" a weibo user commented on a media report on Monday, referring to China's recent property boom and buying frenzy.

However, in contrast to the popular sentiment online, unofficial statistics show the real size of China's rising middle class, widely seen as the new rich lavishing on expensive goods, might not be as big as previously thought.

"According to our internal model, top 10 percent of urban households have income per capita above 120,000 yuan in 2015," said Ernan Cui, Beijing-based China Consumer Analyst at Gavekal Dragonomics.

($1 = 6.7714 Chinese yuan)

(Reporting by Yawen Chen and Ryan Woo; Editing by Jacqueline Wong)



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