China's Ministry of Finance think tank has suggested lifting the lowest level of levying personal income tax from its present 800 yuan (US.39).

　　It also suggested lowering the rate levied on those with medium income - monthly income between 3,000 to 5,000 yuan - to encourage spending and boost the economy, according to a recently released report by the research institute affiliated with the finance ministry.

　　With income growth and the divide enlarging in the country, amending the "Individual Income Tax Law" to adjust the disparity in wealth distribution has become a discussion topic in the past several years. This is the first time the institute made clear its stance, which weighs in favor for a reform.

　　China adopted individual income tax laws in 1980 when a monthly salary of 800 yuan was a level that most Chinese residents could not reach.

　　It regulates that with a deduction of 800 yuan for expenses, income derived from monthly wages and salaries of an individual shall be taxable. The system divides the income into nine grades, with taxes ranging from 5 percent to 45 percent.

　　"In my view, the starting level should be 1,200 yuan," said Bai Jingming, one author of the report. "The average disposable income for Chinese has increased rather significantly over the last two decades."

　　The per capita annual disposable income for an urban resident was 6,859.6 yuan in 2001, compared with 477.6 yuan in 1980, the report said, quoting figures released by the Bureau of Statistics. Bai's view is echoed by tax consultants.

　　"The 800 yuan threshold is too low for residents in big cities such as Beijing, Shanghai and Shenzhen," said Jane Hui, an Ernst & Young partner of tax and business services.

　　Also being challenged is the 15 percent rate levied on the country's medium-income group.

　　"A tax rate of that size will detain suchsgroupsfrom spending," Bai said. The highest rate imposed, 45 percent, is also too high, Hui said.

　　"Only when the tax rates are cut across the board can the aim of spurring the spending being accomplished." she said. "A highest rate of around 35 percent is reason-able for a developing country."

　　The tax rate of China is higher than other developing countries, where personal income taxes generally range between 10 to 30 percent.