China finishes ancient agricultural tax

China is abolishing its 2,600-year-old agricultural tax effective Jan. 1, the government announced Thursday, part of the Communist Party's effort to improve the lot of hundreds of millions of poor farmers. The decision by the Standing Committee of China's national legislature makes official a policy adopted on an experimental basis earlier in response to protests over rising costs from taxes and other government-imposed fees.

China's leaders announced in 2004 plans to eliminate many basic taxes within five years and to subsidize grain output. Most of the 800 million people living in China's countryside have been left behind by the country's economic boom. The government has made improving the lives of the rural poor a priority, fearing that violent clashes between farmers and local authorities over rising tax burdens could threaten social stability.

The tensions have also embarrassed a communist government brought to power in 1949 by Chinese peasants. The National People's Congress, a largely ceremonial parliament which has about 3,000 deputies, usually rubber-stamps policies decided by the ruling Communist Party. It approved Thursday "a motion on abolishing the regulations on the (farm) tax," the official Xinhua News Agency reported.

"China's 2,600-year-old agricultural tax will no longer exist as of Jan. 1, 2006," it said. The agricultural tax, a flat tax based on size of a family and amount of land cultivated, contributed only 5 percent of total tax revenues, according to government figures. The central government has promised to make up for shortfalls in local revenues.

The change in tax policy does nothing to address more fundamental problems faced by farmers who can claim only land use rights, not ownership: the communists banned land ownership when they took power in 1949, promising to liberate peasants from the tyranny of landlords. Farmers have little recourse, and receive minimal compensation, when they lose their land to real estate development and other projects.

The lack of security prevents farm families from using their land as collateral for bank loans. And it makes many reluctant to invest much in land that could be seized at any time by local officials keen to sell the land use rights, reports the AP. N.U.