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China Needs to Improve Taxation of Wealthy, Lawmaker Says

March 7 (Bloomberg) -- China should improve its ability to tax the “truly wealthy” to narrow a growing income gap and stem rising mistrust of the government, Cai Fang, a member of the country’s legislature, said today.

The government should amend policies so that income the wealthy earn outside of salaries, such as from ownership of coal mines and stakes in former state-owned enterprises, is more effectively taxed, Cai, a member of the standing committee of the National People’s Congress, told reporters in Beijing today.

Premier Wen Jiabao pledged in his state-of-the-nation speech to the legislature this week to “vigorously adjust” the distribution of incomes in the country. China has boosted minimum wages, exempted lower wage earners from income taxes and announced plans to build 36 million units of low-cost housing in the five years through 2015 as part of the government’s campaign to narrow the wealth gap.

“The common people are still feeling that the wage gap is growing, and the real reason is due to increasing income from property assets,” said Cai, who is also director of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. “Many people acquire such assets due to special interests, so the common people will increasingly distrust the government if this continues.”

To contact Bloomberg News staff for this story: Daryl Loo in Beijing at dloo7@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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