Recently, the State Taxation Administration released data from the 2023 annual individual income tax settlement, revealing some noteworthy insights. More than 70% of individuals earning comprehensive income in China are not required to pay personal income tax, demonstrating the effectiveness of the tax system in alleviating financial burdens for lower-income earners.
According to the statistics, among those who do pay taxes, over 60% fall into the lowest tax bracket, which is set at a 3% rate. This means that for the majority, the tax amounts are relatively modest.
One of the significant developments in recent years has been the establishment of a comprehensive system for pre-tax deductions in personal income tax. For instance, the basic deduction standard has been raised from 3,500 yuan to 5,000 yuan per person per month. Additionally, there are now seven specific deductions available, including those for children’s education and for supporting elderly family members.
Interestingly, data also shows that the top 10% of income earners are responsible for over 90% of the total personal income tax contributions. Although individuals with an annual income exceeding 1 million yuan make up only about 1% of those filing tax returns, they account for more than half of the total individual income tax collected. In fact, the tax contributions of those in the top income bracket are particularly significant, with over 90% of total individual income tax coming from this group.
Furthermore, recent changes to the special additional deduction standards for the “one old, one young” policy have had a substantial impact on tax relief. In 2023, the deductions for childcare for children under three years old and for education were increased from 1,000 yuan to 2,000 yuan per child per month, while the deduction for supporting elderly parents rose from 2,000 yuan to 3,000 yuan per month. This adjustment has allowed approximately 67 million people nationwide to benefit from these tax breaks, resulting in a total tax reduction exceeding 70 billion yuan, with the average taxpayer saving over 1,000 yuan.
For taxpayers with an annual income of up to 100,000 yuan, most effectively do not have to pay personal income tax. Experts explain that in addition to the basic deduction of 60,000 yuan (the standard threshold), taxpayers can also take advantage of various special deductions related to social insurance, housing loan interest, and other factors, potentially exceeding the taxable income threshold.
To illustrate, Li Ping, the deputy director of the Taxation Scientific Research Institute, provided a breakdown: For a family supporting both children and elderly parents, even after sharing the deductions, a couple could claim a total of 2,500 yuan per month for these expenses—amounting to 30,000 yuan annually. Additionally, when factoring in the basic deduction and typical deductions related to social insurance, taxpayers with an annual income of 100,000 yuan could easily see their taxable income reduced to below the threshold.
In conclusion, the current structure not only provides significant tax relief but also enhances the overall well-being of families across the country.
