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China lowers Tax on Poor as Rising Inflation,Income Inequality (Gini Coefficient at 0.47) reaches Dangerous Levels

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China has increased the tax exemption limits for urban workers by 80% to $540 a month as soaring inflation and rising income inequalities has reached dangerous levels.Note increasing corruption and vast income inequalities have led to increasing incidences of violence and riots in the country.The prices of essential commodities like food and fuel have increased rapidly like in the rest of the developing world.Despite the central bank increasing interest rates,the prices have hardly moderated.Pork prices have touched new records making the life of the poorest quite unbearable.Note Gini’s coefficient in China has reached 0.47 which is very high.While economic prosperity has increased,a vast section of the population remains poor.This is plain in the fact that only 24 million workers out of 300 million urban workers earn more than $6500 per year .

China eases tax burden on poor with law change

The Standing Committee of China’s legislature raised the minimum personal income required to pay taxes from 2,000 yuan ($300) a month to 3,500 yuan ($540).That will reduce the number of taxpayers from 84 million, or 28 percent of workers covered by the law, to about 24 million, or just 7.7 percent, said a tax official, Wang Jianfan. The income tax law covers about 300 million urban workers but not most of China’s hundreds of millions of farmers, who pay tax under a different system.

India is facing the same problems where income inequality and growing corruption has made the population grow quite angry.$2 billion homes (Mukesh Ambani) being constructed in the same city housing the biggest slum in the world (Dharavi)is not helping matters.The ministers and big businessmen are being caught in huge scams which has incensed even the middle class population of the country leading to a successful agitation against corruption by civil society led by Anna Hazare.So far the Indian government has not done much failing much except for some social sector schemes unleashed during the last election.Rising fuel and food prices are increasing strains while shocking unemployment/underemployment among workers remains rampant.The poor class is facing the worst as most of their earnings go towards food and fuel whose prices have risen faster than their incomes.

Inequality in China: Rural poverty persists as urban wealth balloons

In 2010, China’s Gini-coefficient – a measure of how wealth is distributed in a society – stood at 0.47 (a value of 0 suggests total equality, a value of 1 extreme inequality).In other words, inequality in China has now surpassed that in the United States, and surged through the 0.4 level in the mid-2000s.

Despite the continued growth in urbanisation, some 50.3% of China’s mainland population (or 674.15 million people) continue to live in rural areas.In 2010, rural residents had an annual average per capita disposable income of 5,900 yuan ($898). That’s less than a third of the average per capita disposable income of urban residents, which stood at 19,100 yuan ($2,900).


Abhishek Shah

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