Industry veterans have welcomed plans to reform China's personal income-tax system.

　　Sources with the Ministry of Finance said in Beijing on Tuesday the reforms aim to improve the system and prevent tax evasion.

　　"The collection of individual income taxes must follow the principle of fairness and keep the burden on each taxpayer at a reasonable level," an official from the ministry's tax affairs department said.

　　"It's also necessary to remove the loopholes in the system which give convenience to tax evaders."

　　Officials have hinted that China will move to collect income tax partly based on individuals' yearly income, instead of levying different categories monthly.

　　"It's definitely right for China to embark on the road to levy tax on a yearly basis because the current system can help individuals dodge tax," Alfred Shum, deputy chairman for tax at Ernst & Young China, told Shanghai Daily in a phone interview yesterday.

　　China puts personal income under 11 categories and tax rates differ on taxable items.

　　Individual salaries or wages are levied with a nine-tier rate, with a top rate of 45 percent.

　　Income from labor services or manuscripts, interest or dividends is taxed a fixed 20 percent.

　　"Some individuals are taking advantage of the current tax law and whitewashing salary as other income to avoid paying more tax," said Shum. "It diminishes total tax revenue even though individual income tax is a small proportion of the total."

　　China collected individual income tax of 141.8 billion yuan (US$17.08 billion) last year.

　　Individual income tax last year contributed 6.5 percent of total tax revenue. The proportion in 1994 was 1 percent.

　　"Individual income tax is emerging as a more and more important tax item with Chinese people's bulging pockets," said Shum, a veteran who has been involved in the tax industry for more than two decades.

　　Shum said it will be feasible to collect tax from high-income people on a yearly basis and go on levying monthly tax on low-income people who don't have fixed residences.

　　Bai jingming, a researcher of a think tank under China's Ministry of Finance, said tax is not only a leverage to create state revenue but is also functional to balance the stark disparity surfacing in the country.