BEIJING, Aug. 31 (Xinhua) -- China's top legislature on Friday voted to adopt the revised Individual Income Tax Law in an effort to pursue fairer income distribution and statutory taxation.

Lawmakers approved the legislation at the end of a five-day bimonthly session of the National People's Congress (NPC) Standing Committee.

The new law states that the minimum threshold for personal income tax exemption will be raised from 3,500 yuan (about 513 U.S. dollars) to 5,000 yuan per month or 60,000 yuan per year.

Speaking to reporters at a press conference, Vice Minister of Finance Cheng Lihua said the standard has fully taken into consideration the factors of per capita consumption expenditure of urban residents, average burden of the employed and the consumer price index.

Those with a monthly income below 20,000 yuan will see their tax cut by over 50 percent, Cheng said.

FAIRER INCOME DISTRIBUTION

The law defines resident individuals and non-resident individuals as two types of taxpayers. In addition, the length of residence used to distinguish between the two groups will be adjusted to 183 days from the previous 365.

Resident individuals refer to those who have a residence or reside in China for a total of 183 days in a tax year while receiving an income either from home or abroad. They should pay income tax in accordance with the law, it stated.

Non-resident individuals are those who have no residence and reside in China for less than a total of 183 days in a tax year. They should pay their tax on the income they receive in China in accordance with the law.

The tax year runs from Jan. 1 to Dec. 31, it stated.

"The purpose of tax reform is to better adjust income distribution and achieve tax burden equitableness by enabling lower-income people to pay less taxes and higher-income groups to pay more," said Zhang Bin, an expert from the National Academy of Economic Strategy of the Chinese Academy of Social Sciences.

Revisions to the law have lived up to the will of the people and are conducive to improving tax equity, thus enabling taxation to better play its role in adjusting income distribution, said Zhang Chunxian, vice chairman of the NPC Standing Committee, during panel discussions.

The individual income tax was the third major contributor to China's total tax revenue, following value-added tax and enterprise income tax. In 2017, China collected individual income taxes worth nearly 1.2 trillion yuan, about 8.3 percent of the total tax revenue.

STATUTORY TAXATION

The majority of taxes in China have been levied through formal or provisional regulations issued by the State Council until 2013, when the Communist Party of China Central Committee said in a reform decision that it would "implement the principle of statutory taxation."

Two years later, the revised Legislation Law made it clear that a tax can only be levied and the tax rate be set with the endorsement of the law.

The revised individual tax law also adds special expense deductions for items like caring for the elderly, children's education, continuing education, treatment for serious diseases, as well as housing loan interest and rent.

According to the law, the State Council should set the range, standards, and enforcement steps for the special expense deductions and then report to the NPC Standing Committee.

"To make the tax-deductible items clear in the revised law embodies the principle of statutory taxation," said Li Wanfu, head of the Institute of Tax Science of the State Administration of Taxation.

Wang Dongming, vice chairman of the NPC Standing Committee, said during panel discussions that the revisions will help lower-and-middle income groups increase their income, and then bridge the income gap and advance a more reasonable and orderly pattern of income distribution.

REFORM BENEFITS SHARED BY ALL

According to the law, the previous method of taxing monthly income will be replaced with a new calculation which focuses on taxing annual income.

The law states that tax authorities should provide taxpayers with information on their income and withheld tax.

The current law has undergone seven revisions since it was enacted in 1980 when the original threshold for individual income tax exemption was 800 yuan per month.

It was raised to 1,600 yuan in 2005 and 2,000 yuan in 2007. The current threshold is 3,500 yuan according to the revision made in 2011.

The new law will come into force on Jan. 1, 2019 while part of the clauses including the minimum threshold for personal income tax exemption will go into force on Oct. 1 this year.