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Strong support for proposal to scrap interest tax

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

Most people believe the 20 percent tax on personal savings interest should be scrapped, according to a survey conducted by China Daily's website.

At this year's National People's Congress and Chinese People's Political Consultative Conference (CPPCC), 28 CPPCC members called on the government to drop its tax on savings interest to protect low-income earners, who make up the bulk of depositors in China.

In a poll conducted by China Daily's website (www.chinadaily.com.cn), 68.46 percent of the 1,116 respondents, or 764 people, said the tax should be dumped, while 22.85 percent or 255 did not support the proposal, and the rest said they had no comment.

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The tax on savings deposit interest for all renminbi and foreign currency accounts opened by individuals at Chinese banks was introduced in 1999, in a bid to reduce mounting individual savings and stimulate consumer spending.

Seven years on, the central bank said China's renminbi savings deposits were 16.16 trillion yuan at the end of last year, up 12.93 percent on the previous year.

Meanwhile, the tax levied by the central government has increased from 20 billion yuan in 1999 to over 40 billion yuan in 2006.

According to the CPPCC members' proposal, the tax on interest failed to discourage people from depositing money into savings accounts. Nor did it stimulate consumer spending, with the consumption rate dropping to a record low of 51 percent last year.

Further, the macroeconomic environment has greatly changed over the past seven years, and China's economy has grown out of deflation, the proposal said.