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Chinese Vice Premier Hui Liangyu on Wednesday described the country's rescission of the 2,600-year-old agricultural tax as a landmark event.

Addressing a seminar held by the Ministry of Finance and the General Administration of Taxation on the rescission, the vice premier said the move represents one of the most important measures taken by China to balance rural and urban development that will benefit hundreds of millions of farmers.

He promised the Chinese government will gradually increase spending on agriculture and rural projects.

Chinese Finance Minister Jin Renqing said on Thursday the central, provincial and city governments will set aside over 100 billion yuan (US$12.5 billion) this year to make up for the fiscal income losses of grassroots governments in a tax reform aimed at easing the burden of the farmers.

China's national legislature, the National People's Congress (NPC), passed a motion late last year to abolish the tax as of Jan. 1 this year.

Agricultural tax emerged in China as early as in the Period of Warring States (475-221 B.C.), which resulted in agricultural taxes being collected in almost every feudal dynasties.

In 1958, the NPC adopted the Regulations on Agricultural Tax.

In March 2004, Premier Wen Jiabao announced in his annual government work report that the Chinese government would reduce agricultural taxes every year and finally abolish it.

Statistics show that in 1949, agricultural tax revenue took up to 39 percent of the country's total tax revenue, but the percentage dropped to merely one percent in 2000 due to the expansion of the country's manufacturing and service sectors.

In 2005, the Chinese government collected only about 1.5 billion yuan of agricultural taxes, and experts say rooting out agricultural taxes could not influence the country's financial revenue too much.

(Xinhua News Agency February 23, 2006)