Personal Income Tax Reform Study

Along with the development of economy and society, the external environment of China's personal income tax has changed greatly, and the classified income tax system also produced much defect and inadequateness. To push further the reform of personal income tax system will be necessary for optimizing China's personal income tax system and promoting the function. The reform of personal income tax system is not the reform of a certain element, but entering a comprehensive reform stage. The reform need to be combined with the present situation of China's economic and social development, considering the measures maneuverability of overall planning, including the change of the tax mode, and the expense deduction, and the adjustment of tax rates table, and the restructuring collection and management process.The conversion of taxation mode requires the taxpayers not to pay tax passively but actively. This is the substantial change of tax payers' and tax collectors'behavior, so it is necessary to analyze tax payers' and tax collectors' behavior. This paper puts forward that limited rationality of tax behavior that contains the bounded rationality of taxation behavior and the bounded rationality of paying tax. Limited knowledge and limited perception ability and limited memory ability and limited the information processing ability, etc. produce the "bounded rationality" in reality. Designing China's personal income tax system should be based on this limited rationality, to devise a "satisfactory" tax system, and gradually get close to the optimal tax system. Enhancing the transparency of personal income tax system, and defining internal constraints and external constraints, is effectively an important way to improve limited rationality of tax behavior. This thesis argues that China's personal income tax should be aimed at different income levels on expanding income gap, by designing different tax elements, to play the function of automatic stabilizers for different income levels, and the adjusting function for high-income people. The phased function of personal income tax is determined by different economic development phases. As the income distribution gap relieves greatly and the income level of resident increased, personal income tax should exert the function of income functions. The level of household income, and the situation of income distribution, and the technology of collection, and the awareness to pay personal income tax composed of the external realistic constraint for designing personal income tax.Since 1980s, the reform of personal income tax system in other countries provides china with beneficial experiences. The rising and practicing of the flat tax and from the comprehensive income tax mode to the dual income tax change, then paying attention to commodity tax again, provide experiences for personal income tax reform of China. In the process of adjusting the China's overall tax structure, China should design the specific personal income tax according to the national conditions, to play the interaction function of the specific tax system and reasonable tax structure, and to realize the economic development and the social development goals. The contradiction of simplification of tax system and the mixed complicate collection, and the contradiction of the low income distribution of personal income tax and the adjusting income distribution, and the contradiction of social public attention to individual income tax and relatively strange decide the orientation of China's personal income tax system reform: focusing on adjusting income distribution, and adjusting tax structure, and strengthening tax transparency.The mixed taxation mode of comprehensive and classification is the goal mode of China's personal income tax reform. The mixed taxation mode of comprehensive and classification is a kind of deviation from standard tax mode, and this deviation is the active exploration of seeking the optimum taxation mode for China. The reform of China's personal income tax system should not be confined to specific tax elements, but the fundamental reform under the mixed taxation mode of comprehensive and classification. Defining the essence and operation of tax mode is the premise for the specific elements designing. The mixed taxation mode of comprehensive and classification is the revolutionize for the tax mode of traditional classification in the specific design, the effective connection with the existing tax system should be considered, it is more important to consider the reality of China's economic and social development. The key of the transitions mode of personal income tax system is to design the comprehensive collection, because the different designs need different conditions. It is a difficulty for comprehensive collection. Considering the tax compliance degrees of taxpayers and simplification of tax system, and avoiding taxpayer the irrational behavior, China's personal income tax shall be the effective connection with the old tax system.The design of taxpayer and the scope of levy and deduction standard and tax rates and other major tax elements should reduce the tax burden on the low and middle income groups, and strengthen the adjustment function for high income group, and play the role of regulating the income distribution and narrowing the income gap through "cutting high". This thesis is based on above consideration for designing personal income tax system. Admittedly, in the process of tax mode conversion, whether taxpayers or countries have to undergo some pains. The taxpayers adapt to the new tax system needs a period and the country in the process may lose certain tax revenue, but this paper believes that it is the cost of tax mode transitions, and is a . process for China's personal income tax maturity. Then China's overall tax structure and gradually optimized, and the personal income tax gradually mature, its tax system elements design will gradually move towards being scientific and reasonable.The elements of personal income tax system and taxation management is the "two wings" for the personal income tax system operation. The effect of the personal income tax system is closely related to the tax management. The taxation management of China's personal income tax should be based on the China's economic and social development situation and taxation collection. The tax unit should be individual for realistic feasibility and operability, and withholding system can be effectively strengthened through the management of the Internet, and self-declaration process based on internet is the trend. Meanwhile, the relevant supporting system and measures should be perfected, which include establishing personal income tax information platform, and establishing effective income monitoring system, and forming perfect information sharing mechanism among departments, and establishing auditing system for personal income tax, and establishing the assistance mechanism. Collection and management system, and perfect supporting mechanism and measures decide the process of the reform of China's personal income tax system.