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China to cut income tax for 60 million people

China's government is attempting to boost spending and fuel sustainable economic growth though income tax cuts. Only 8 percent of Chinese will now pay income tax.

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A clothing shop worker holds a banner saying 'All items, Last 3 days' to draw attentions of customers for their summer sale in Shanghai, China, Friday, Aug. 12. China's government is attempting to boost spending and fuel sustainable economic growth though income tax cuts for 60 million people. The tax break offers consumers some relief in the face of high inflation, which was running at an annual rate of 6.5 percent last month and eating into family budgets.

Eugene Hoshiko/AP

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Some 60 million Chinese will wake up newly exempt from income tax tomorrow morning, as the government tries to boost poorer peoples’ spending power and fuel sustainable economic growth.

Though a few top earners will pay more, almost everyone else will get a break, according to Finance Ministry calculations.

“This is good news for most people, especially low- and middle-income employees,” says Yi Xianrong, a finance expert at the China Academy of Social Sciences think tank.

The tax break offers consumers some relief in the face of high inflation, which was running at an annual rate of 6.5 percent last month and eating into family budgets.

The biggest beneficiaries will be those at the bottom of the tax scale. The lowest rung of the income-tax ladder has been raised from 2,000 renminbi ($313) per month to 3,500 RMB ($547). The average Chinese wage is around 3,000 RMB a month.

The tax reform, made more generous after a wave of online protest against earlier government proposals for stingier changes, means that only about 8 percent of Chinese will pay any income tax at all, according to Wang Jianfan, deputy director of the Finance Ministry’s tax policy department.

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