Center

Strong support for proposal to scrap interest tax

By Liu Jie (China Daily)
Updated: 2007-03-30 09:56

"The motivation for the interest tax to reduce bank savings, boost consumer spending and curb deflation no longer exists. Therefore, it seems unnecessary to continue the policy," it said.

Some netizens said the policy mostly affected low-income earners. One respondent said that the affluent invested their money into other channels, but the poor, especially the elderly, tended to save their money in banks.

"In China, the rich don't rely on interest income to increase their wealth. Instead they invest or go for high-paying speculation activities," said another respondent. "Wage earners and the poor rely on interest income to increase their money, so the interest tax only hurts the poor."

Respondents said the savings interest tax was unfair to low-income earners the majority of bank savings depositors in China.

They also said that, taking into account both inflation and the interest tax, the real interest rate on bank deposits was actually negative so it was time to abolish it.

One respondent suggested the central authorities cut the current taxation rate on personal savings earnings from the current 20 percent to 10 percent, and after a grace period of one to two years the policy could be abolished.

"As inflation is rising to nearly 3 percent a month, it is time for the central bank to consider halving the tax, and ultimately to get rid of it," another netizen said. "Otherwise, the interests of bank depositors will be harmed, because the savings rate, less than 3 percent, will not keep pace with inflation."

Another netizen said the government could adopt different tax rates for rich and poor.

(China Daily 03/30/2007 page15)