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Agriculture tax cut welcomed
( 2004-01-12 23:22) (China Daily)

The central government's decision to waive the special agricultural product tax is a wise and timely measure to further alleviate the heavy financial burdens on the country's more than 900 million farmers, experts said.

"The move will undoubtedly help build strengthen farmers,'' said Niu Li, a senior economist with the State Information Centre.

The so-called special agricultural product tax is a major tax item in the rural areas, which is levied on farmers who produce almost all special local products ranging from fruit, aquatic products and flowers to mushrooms with an average tax rate of 8 per cent.

The tax, which accounts for a small part of the government revenue, could mean big financial burdens for farmers, who have suffered consecutive falls in their income growth, Niu said.

Official figures suggest that farmers' per capita income grew 9 per cent in 1996, but the growth rate dropped to 4.6 per cent in 1997, 3.8 per cent in 1998, 2.1 per cent in 2000, 4.2 per cent in 2001, and about 4 per cent last year.

Meanwhile, the income gap between farmers and urban dwellers had become large during recent years.

Per capita income earned by urban dwellers was 2.5 times that of farmers in 1998. But in 2002, the per capita income of urban dwellers was 3.3 times that of farmers.

Finance Minister Jin Renqing said that except a special tax on tobacco, the government will not impose the special agricultural product tax on farmers this year.

The government will also lower the average agriculture tax rate, which currently stands at about 8.4 per cent, by 1 percentage point this year, Jin said.

"In areas where the conditions are appropriate, the agriculture tax could be reduced further or exempted," he said.

In line with the "fees-for-tax" plan initiated in early 2000, farmers are required to pay only agricultural tax, special agricultural product tax and some additional taxes.

Despite benefiting from the rural taxation reform, an increasing number of researchers and economists have been calling for the complete abolition of all agricultural taxes.

Zhang Peisen, a senior expert with the Taxation Research Institute under the State Administration of Taxation, said: "There has been less reason and growing irrationality for maintaining the existing agricultural tax and fee system."

Official statistics suggested that the proportion of agricultural tax revenues to the country's total has declined from 4.6 per cent in 1995 to 3.7 per cent in 2000.

"Exemption of agricultural taxes will not affect the country's fiscal stability, but will greatly benefit agricultural development,'' he said.

China is now practicing two different tax systems in the rural and urban areas, a situation which is considered unfair for farmers.

In cities, taxes are usually levied on net profits, but not on costs.

This means in practice that a certain amount of costs would be deducted before the money earned by individuals or companies are taxed.

For example, the income tax threshold for ordinary city dwellers is 800 yuan (US$96.4).

But in rural areas, the agriculture tax levy, for example, is based on grain production, no matter how much farmers have invested.

"The tax system is unfair for farmers,'' said Ni Hongri, a senior researcher with the State Council's Development Research Centre.

If the tax departments set a tax threshold for farmers as they do for city dwellers, a majority of farmers would not need to pay taxes, Ni said.

A unified tax system is in line with the principal of fair taxes for all, both Zhang and Ni agreed.

"When the time is ripe, the country should unify the tax systems in the rural and urban areas,'' Zhang said.

 
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