The State Council pledged on Nov 20 to continue reducing the tax burden on individuals by improving the individual income tax deduction mechanism, with experts urging more steps to reduce the burden on middle-and low-income groups.

The Cabinet said in a statement after an executive meeting that it had adopted a temporary decision to exempt those whose aggregate annual income is no higher than 120,000 yuan ($17,000) within a period of two years from the obligation to declare the settlement and payment of individual income taxes.

China rolled out steps to reform its individual income tax system last year, with measures including raising the earnings threshold for the collection of income tax from 3,500 yuan to 5,000 yuan a month, adjusting tax brackets and offering new deductions.

Deductions were offered for taxpayer expenditures in six areas: children's education, continuing education, health treatment for serious diseases, interest on home loans, rent, and elderly care.

The Cabinet said in its statement that cuts to individual income tax in the first nine months of this year amounted to over 440 billion yuan, benefiting about 250 million taxpayers.

The Ministry of Finance said last week that fiscal income from individual income tax was down 28.6 percent year-on-year in the first 10 months of the year.

The tax cuts have driven up domestic consumption, with sales revenue from the service sector in the first three quarters of the year up 16.2 percent year-on-year and sales revenue from e-commerce up 16.8 percent, the State Taxation Administration said.

The tax reform has helped balance income distribution and expand consumption. In the next step, the country will establish a tax collection regime based on the yearly income of individuals and better implement and further improve the additional deductions, the Cabinet said.

Edmund Yang, a partner focusing on tax services at accountancy firm PwC, said the latest measures unveiled by the State Council will benefit middle-and low-income groups as the country faces mounting downward pressure on its economy, even though details of the implementation of new policies are yet to be rolled out.

The additional deductions reduced the burden on individual taxpayers and increased their take-home pay and disposable incomes, he said.

"It was definitely a good start for the income tax reform, especially for those with children to raise and parents to provide for," he said.

However, Yang said there is still room for the deduction policies to be better tailored to the needs of individual taxpayers.

He also urged the authorities to adjust the threshold for taxable income in line with the annual rise in the consumer price index.

"This year we have seen soaring prices of fruit and pork driving up the CPI, which substantially increased the expenditure of taxpayers. Thus it is important to take the CPI into account in future tax reforms," he said.

In the meantime, the authorities should come up with measures to diversify tax revenues via channels such as levying a property tax and an inheritance tax, he said.

The State Council meeting adopted a decision to tax only half of the individual income of seafarers who work for a period of at least 183 days within a tax year on seagoing ships.

The tax cut, effective until the end of 2023, is aimed at spurring the growth of shipping industries, the Cabinet said.

The policy has been well-received by the country's shipping companies. China COSCO Shipping said in a statement that more than 40,000 sailors it employs will be able to enjoy an average tax cut of 80 to 90 percent.

"It showcased the central government's concern for seagoing sailors, and will serve as a boost to the country's shipping sector," it said.