Chinese Online Class - Interest income tax reduced to 5% today

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BIZCHINA / Center

Interest income tax reduced to 5% today

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2007-08-15 15:11

The tax on personal bank savings interest has been lowered from 20 to
five percent as of today, according to a report from hexun.com.

On July 20, the central bank decided to raise interest rates and cut the
withholding tax on interest income?in a coordinated move to get the
blistering economy onto a healthier footing.

The National People's Congress authorized the government to change or
abolish the tax in June.

Related readings:

?China raises benchmark interest rate by 27 basis points
?Interest tax cut for foreigners too
?China slashes tax on interest income
?Tax on interest hinders consumer spending push

Meanwhile, banks' reserve requirement ratio was raised by 0.5 percentage
points, also effective today, meaning that about 160 billion yuan in bank
capital will be frozen.

This marks the sixth time the central bank has raised the reserve
requirement ratio this year. The ratio will reach 12 percent for big
lenders after the adjustment.

To slow down the economy and control bank loans, the central bank has
also raised interest rates three times this year.

Although a series of tightening measures were unveiled, China's gross
domestic product was 11.5 percent higher in the first half than the same
period of last year, half a percentage point up from the 2006 first-half
rise, and fixed assets investment soared 25.9 percent, according to
statistics from the National Bureau of Statistics.

The tax was introduced in November 1999 to encourage domestic consumption.

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