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China Plan to Ease Income Tax Burden Will Benefit Poor City Dwellers

China plans to eliminate income taxes for low-income workers. However, experts say the measure will mainly benefit poor people in the cities rather than the majority of China's poor in the countryside.

The Chinese government plans to help some of the country's poorest by nearly doubling the threshold for paying personal income tax.

State media reported on Tuesday that China's parliament agreed to raise the lowest taxable income to $185 a month, from the current $99.

The official Xinhua News Agency says the plan will "relieve the tax burden for the middle and low-income groups."

However, some economists and financial analysts say the measure will do little to help low-income earners in the countryside. A growing gap between the rich and poor, combined with land disputes and corruption, has contributed to thousands of incidents of unrest in the past few years in China's small towns and villages.

Lai Hongyi is a research fellow in China politics and development policy at the East Asia Institute at the National University of Singapore. He says average income levels in the countryside are already far below the taxable income level and the main reason for the tax adjustment is the rising national average income.

"Probably the timing may have to do with the fact that the government had been paying a lot of attention to helping out the peasants and the poor people in the countryside," he said. "Maybe now they feel that they should also pay attention to the people in need in the cities."

The Xinhua News Agency says the government instituted the current minimum taxable income level in 1980 when the average worker made less than $15 a month.

The official China Daily newspaper reported on Monday the average urban income is likely to reach one hundred dollars a month this year. Last year, incomes in the countryside were only a third of those in the city.