Employees earning more than 120,000 yuan
(US$15,000) annually need to report their income directly to the tax
authorities from next year, it was announced Monday.
It is the first time that the State Administration of Taxation requires
high-income earners to report their earnings themselves.
For those who earn less than 120,000 yuan a year, employers will
continue to deduct tax at source and report to the authorities.
Observers said that they believe the move signifies the government's
resolve to narrow the gap between the rich and the poor, and to increase
The taxation administration said in a statement on its website that
anyone including foreigners working in China who meets any of the
following criteria needs to report their incomes to the taxation
People with an annual income of more than 120,000 yuan
with income from more than one organization
with income from overseas
whose employer does not pay tax
or as stipulated by the State Council, the cabinet.
"If this policy is executed effectively, it will play a part in
redressing the income
discrepancy between the high-income group and ordinary
wage-earners," said Peng Longyun, a senior economist with the Asian
Development Bank (ADB) in Beijing.
ADB's Peng said that taxation authorities currently have only one
source of access to people's income, either through their own reports or
from their employers. But they will have two when the new regulation is
implemented; and so can crosscheck for discrepancies.
People above the 120,000-yuan threshold who fail to report their
earnings within three months of the end of the taxation year can be fined
up to 10,000 yuan (US$1,270), while filing false reports can attract fines
of up to 50,000 yuan (US$6,350) in addition to a maximum of five times the
tax amount due.