Regulating the "grey income", a new term that appeared in the government work report delivered by Premier Wen Jiabao last week to the National People's Congress (NPC), has sparked heated debate among lawmakers.
"We must outlaw illicit incomes and regulate grey incomes to gradually develop an open and transparent income distribution system", Wen said.
The term "grey income" was coined in China after the country ushered in the reform and opening-up policy in 1978. It describes gains above official earnings ranging from the payment a professor receives for giving a lecture outside the college to gifts a teacher is given by parents who ask for more attention for their children.
It is labeled "grey" because it falls into no taxable category under the current law, triggering wide skepticism among the public.
"I am confused, as grey incomes should be banned rather than being regulated," said NPC deputy Wang Yangjuan, echoed by deputy Huang Lanxiang who argued it was difficult to define grey income.
However, Wen's mention of "regulating" the undefined income has won understanding and welcome among other deputies. Some of them noted that the misreading could have been avoided if the term was accompanied by a note.
"Only when grey income is clarified can the legal portion of it be taxed and the illegal portion eradicated," said Li Xinyan, vice head of the Fujian Provincial Federation of Industry and Commerce.
"Regulating grey incomes is not equal to admitting its legitimacy," said another deputy, Cai Fang, also head of the Institute of Population and Labor Economics at the China Academy of Social Sciences.
By regulating it, it is possible to clarify the "grey' area and identify it as either "black" or "white" (illegal or legal), he said.
This comes as part of the government's efforts to redistribute national income with the aim to improve people's livelihoods and promoting social harmony, Cai said.
The fair distribution of social wealth, at the center of heated discussions by deputies, has become one of the issues on the government's top agenda as the country is faced with a widening gap between rich and poor.
Deputy Dai Zhongchuan, vice head of the school of law at the Fujian-based Huaqiao University, read the term in the same light.
"The aim of regulating grey incomes is to wipe off the grey area by drawing a clear-cut line between the legal and illegal portion," he said.
Dai continued to say that "grey" gains take a relatively large share of the income paid in some sectors, resulting in an unfair distribution of social wealth.
Cai deemed energy monopolies a hotbed of grey income, as state-owned enterprises in the fields of electricity, oil, natural gas and other resources, subject to no market competition, reaped lucrative profits and paid handsome remunerations to their employees.
Employees in energy monopolies earned 10 times more than their counterparts working in non-monopoly sectors, according to Liu Minghua, a member to the National Committee of the Chinese People's Political Consultative Conference on Monday.
Cai said outlawing the illicit portion in "grey incomes" and taxing the legal portion is conducive to narrowing the income gap.
In this sense, regulating "grey incomes" refers to bringing competition to those sectors that need not be monopolized and the income and dividend levels in those monopolies should be tightly monitored, Cai said.
Cai called for a larger share of profits of energy monopolies to be handed in to the national coffer.
He also expected legal boundaries to be set up in the future to identify which part of grey incomes are legal or illegal.
Relevant research aimed at regulating "grey incomes" is already underway, according to deputies in charge of income administration from the Ministry of Human Resources and Social Security.