China is to stick to its proposed 3,000 yuan (US$462) threshold for personal income tax despite public opinion that it is still too low to reflect the higher cost of living.

However, in its second review of a draft amendment on income tax, the Standing Committee of the National People's Congress did echo public concern that the tax burden is too high by cutting the lowest tax rate from 5 percent to 3 percent.

Hong Hu, vice chairman of the law committee of the 11th National People's Congress, said the 3,000 yuan exemption was set to remain based on the views of experts, lawmakers and the public.

Hong said the public's wish for a higher threshold to lower the tax burden for low and middle income earners could be achieved by cutting the tax rate rather than solely raising the threshold.

Under the revised amendment, an individual earning 4,500 yuan a month will pay 30 yuan less tax.

At present, individuals earning under 2,000 yuan a month do not pay income tax. In an April draft, the exemption was increased to 3,000 yuan, and the current nine tax brackets cut to seven, taking more people into the 5 percent to 10 percent brackets.

China currently levies tax progressively on personal salaries, from 5 percent to 45 percent.

Public opinion was sought on the April draft and 237,684 opinions and suggestions were received between April 25 and May 31, with 15 percent favoring raising the threshold to 3,000 yuan.

However, 48 percent suggested it should be further raised to 5,000 yuan.

"I feel a little bit disappointed on hearing that the 3,000 yuan exemption will remain after all the talks about possible further increase," said Sun Xiaobu, a Shanghai white-collar worker who earns 13,000 yuan a month before tax.

"But an increase to 3,000 yuan is better than nothing, and I am now more eager to know when the new exemption will take effect."

Zuo Xiaolei, Galaxy Securities' chief economist, said she welcomed the tax rate cut from 5 percent to 3 percent to help low-income earners gain more purchasing power.

She added: "The tax bracket on middle-income groups should also be cut to build up the group as long as it's not a huge hit to China's tax income."

Market watchers said they expected the 3,000 yuan threshold to remain.

Finance Minister Xie Xuren said in April that the revised tax system would take some 120 billion yuan from fiscal revenue compared to 2010.

China collected 7.3 trillion yuan of tax in 2010, up 23 percent from the year before.

Last year, individual income tax grew 22.5 percent to 483.7 billion yuan, up 16.4 percentage points from 2009.

Income tax accounted for about 6 percent of China's fiscal revenue last year.

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