China to Introduce Income Tax in 1987

China will introduce an income tax next year in a bid to narrow the rapidly widening gap between rich and poor in this Communist nation, the official New China News Agency said Thursday.

The “Provisions on Individual Income Regulation Tax,” issued by the State Council, will apply to all Chinese citizens with residence and income in China, the agency said.

The tax, to take effect Jan. 1, is part of a government bid to narrow the income gap “now that the state policy encourages a few to go first in achieving prosperity through honest labor,” it added.

The tax rate and the taxable portion of personal income will vary according to 11 wage “zones” in China. These zones are defined as a system of paying differing wages to workers of the same rank in areas where living conditions and prices vary.

In Peking, which is in the sixth zone, the tax will be levied on those who receive a monthly income of more than $110, and the rate will rise progressively.

The new tax is unlikely to affect much of the population in the countryside, where the average annual income was $107 last year. The average urban wage was $203.

But it may hit workers receiving increasingly large bonuses from their work units as a government-approved incentive to boost production. It will also hurt the country’s 17 million private entrepreneurs, who already pay income taxes ranging from 7% to 60%.