China will exempt the agricultural tax for farmers throughout the country in 2006, two years ahead of schedule, Premier Wen Jiabao announced here Saturday in his annual government work report to the parliament.

"The agricultural tax will be exempted throughout the country next year, which means what had been targeted for five years will be achieved in three," Wen told the annual full session of the National People's Congress (NPC) that opened Saturday.

The premier told the legislators that the government will speed up the nationwide process of agricultural tax reduction, exempt the tax in 592 counties included in the national poverty relief program and do away with livestock taxes across the country before the end of this year.

"Revenue decreases in local budgets brought about by reduced or exempted taxes on agriculture and livestock will be offset principally by transfer payments from the central government," the premier said in his report.

This will involve an additional 14 billion yuan (1.7 billion US dollars) from the central budget this year and will bring the total expenditure to 66.4 billion yuan (8 billion US dollars), he added.

The government first declared to phase out the centuries-old levies during last year's annual NPC session, when the premier pledged to reduce the overall agricultural tax rate by over one percentage point each year, and rescind the levy in five years.

To date, 26 of China's 31 provinces, municipalities and autonomous regions have announced termination of all agricultural taxes before the end of this year, when about 730 million farmers will have been relieved from the levy, said Fan Xiaojian, vice minister of agriculture, at a recent work conference in east China's Shandong Province.

The five localities that will continue to charge agricultural taxes, including the provinces of Hebei, Shandong, Yunnan and Gansu and the Guangxi Zhuang Autonomous Region, will reduce taxes by at least 2 percent this year, according to Fan.

Editor: Catherine