BEIJING, Nov. 9 (Xinhua) -- Employees earning more than 120,000 yuan (about 15,000 U.S. dollars) annually must file individual income declarations to tax authorities starting next year, according to a newly released regulation from the State Administration of Taxation.

    The regulation issued on Wednesday said that anyone working in China, including foreigners, who meets any of the following criteria -- people with a yearly income of more than 120,000 yuan, people with income from more than one organization, those with income from overseas, those whose employer does not pay tax, or those in other particular situations defined by the State Council -- must report their income to the taxation authorities.

    Contributions to endowment insurance, medical insurance, unemployment insurance and housing accumulation fund paid by companies or individuals are not counted as yearly income.

    An official with the State Administration of Taxation said many high income individuals in China obtain income through different channels, some of which are not made public. This creates difficulties for the tax authorities and leaves space for loopholes.

    This is the first time that the State Administration of Taxation has required high-income earners to report their earnings. However, their taxes will continue to be deducted at source by employers.

    High income earners will be subject to fines ranging from 2,000 to 10,000 yuan if they fail to report their income by the 31 March deadline, and those who file false reports will face fines of up to 50,000 yuan.

    The new regulation will improve tax collection among high income individuals and help narrow the gap between the rich and the poor, the official said.

    A study shows China's Gini Coefficient, a measure of income inequality, has reached 0.46, reflecting a big and expanding wealth gap.

    In another move to reduce the country's widening income gap, China's legislature, the Standing Committee of the National People's Congress (NPC), doubled the personal income tax exemption threshold in late 2005 to 1,600 yuan a month. This halved the number of people required to pay tax.