A Comparison Study On Mainland China's Individual Income Tax Scheme Versus Taiwan's Combined Income Tax Scheme

Given that individual income tax continues to serve as the bellwether in taxing individual income, and as a broad-based taxation scheme, a majority of the countries around the world have since adopted some kind of individual income tax scheme. Particularly so are in regions that adopt the market economy, where the sources of individual income could be infinitely diverse, the levy of income tax not only helps to increase Treasury revenues in realizing the fiscal revenue function through taxation, but it also helps to bridge the gap between the rich and the poor in realizing social fairness and justice, developing national gross product, and serving to fulfill the function of taxation distribution and economic moderation.Once belonging to the same ethnicity of an extended bloodline, Mainland China and Taiwan have only been separated at the onset of the Republican era arisen from internal upheavals and foreign invasions, resulting in separate political rules and segregation without any formal tie. It is not until the mid 1990s as the Taiwan regime lifted the family visitation ban and liberated the indirect business investment policy has the cross-strait exchange that has been severed for nearly four decades been resumed. As more and more Taiwanese residents begin to invest, travel and settle in the mainland region, and as the cross-strait policy is bracing for a more liberal approach, the bilateral economic, trade and cultural exchange and influences are expected to accelerate over time.Yet irrefutably is how individual income tax is closely tied to the source of individual income, consumption tendency, duration of residency and the like. The reason for choosing this topic to conduct an in-depth research lies in profiling and comparing the individual income tax schemes prevailing in the two destinations across the Taiwan Strait in an attempt to instill the Taiwanese residents with a correct concept in declaring and paying taxes by honoring the tax declaration and remittance obligations on a voluntary basis to legally protect their own equities.As known by all, perfecting a host of taxation systems remains a gradual process, and as Mainland China and Taiwan are let in on the World Trade Organization in 2001,under the WTO framework, it is expectant that individual income tax related policies would need to undergo adjustments in order to bridge to worldwide practices. At a critical time such as this, it is imperative that all taxpayers be aware of the changing scenario in anticipation that an individual taxation scheme that supports the present time and meets the global trends could be instilled, under the requisite that a consensus could be reached and agreed upon between the two sides.