Legal Research On Capital Gains Taxation

Alongside with the vivid development of capital market, especially the security market, how to tax capital gains earned from daily transactions become an issue recently. However, due to capital gains’remarkably unique characteristics different from the classic income, researches in capital gains taxation in China cannot hold together as a system yet, not to say its theoretical developments. This fact is result from the original legislation choice made by Chinese legislator. China leave the capital gains part blank within the whole income tax law system on purpose, because of its differences will harm the harmonious of the income tax law. To be clarified, capital gains are more occasional, unstable and conceptual, which cannot fit in the income’s periodic and stable facts. But China doesn’t exclude capital gains from its income tax law system, it keeps capital gains in its tax bases, and use specific regulations or tax exemptions or other methods to fulfill tax purpose, such as simply hand over them to other kind taxes like business tax, land value added tax or house tax. It was a reasonable move back then. But now, multiplied by the numerious business activities and the prosperous capital market, capital gains take large portion in total income of individuals and corporations. Income taxation itself also earned considerable growth at the same time. The income tax system as a whole needs further improvements to restore its capacity-to-pay and social welfare redistribution function.Thanks to the development of capital market, capital transactions become more and more common in our daily life. Taxpayer, especially corporate taxpayer does lots different kinds of capital transactions during their business running. Additionally, during the finical crisis in 2008, corporations speak highly of reorganization which may helps them get through this finical turbulence safely. At the same time, those corporations do not want tax rules be a barrier when they use it. In response, Chinese government issued a tax regulation on reorganization area, clarified the general treatments and special treatments of corporate reorganization. However, as one of the most complicate capital transaction type, reorganization has high requirements on tax techniques. Based on the absence of capital gains theory, this regulation didn’t function well.On the other side, the theoretical research on capital gains taxation is less active. Hitherto, most of the researches on capital gains area followed the "tackle problem" way of thinking. Some of them are based on capital gains tax law introduction from foreign countries; some of them are focus on the analysis and explanation of current regulations and problems. Noteworthy speaking, several scholars have noticed the fundamental differences between capital gains and incomes, but they pin their hope on daily taxation experiences. In their theory, the general capital gains tax rules can be observed gradually from the daily experiences. Although this thought is already a step forward from the original thinking, it still didn’t overcome the old thinking path. The shortcoming of Chinese capital gains tax law is on the theory side. It is uneconomic even dangerous to advance in "theory blank" situation. Therefore, this article is aimed to learn the advance capital gains theories from foreign countries, and make choices from them based on outward condition and inward tax law system analyses.To fufill this goal, this article followed "experience to theory and back to experience" research path. First of all, this article summarized the facts and deficit of our current capital gains regulations in income tax law system based on the basic concept clarification of capital gains. To this end, this article started with an incorporation case. From this case, it illustrated three main questions in our capital gains tax regulations. After that, this article explained the foundation already placed for capital gains in China from both theory and reality analysis. (Chapter 2,3)Then, this article detailed both the capital gains tax law developments and theory developments in England, Germany and America. Following these researches, this article found the common feature of those capital gains tax systems that they all recognize gains when there is a realization event. Based on our capital gains tax regulation development facts, this article chose America as a reference. (Chapter 4)Further, based on American model, this article detailed the main theory of transaction tax and introduced the main character of this theory, realization rules. Moreover, this article also addressed realization rule’s influence on tax basis conception. (Chapter 5)At the end, this article back to China’s issue with those advanced tax theories. To be specific, at first, this article compared the differences between those same terms used inside and outside of China, then pointed out that the usage in China is misleading. Second, this article analyzed the experiences and lessons from other countries or area who tried or introduced capital gains tax system, such as South Africa, New Zealand, India and Taiwan, then addressed its own thoughts on China’s future transplantation based on. (Chapter 6,7)...