China's Individual Income Tax Reform From Perspective Of Public Choice Theory

Since China started taxing on the individual income, the share of individual income tax over the total tax has been increasing. The individual income tax has become the fourth largest tax in China and an important source for fiscal revenue. However, while the tax has well performed its finance function, the function of adjusting income distribution has not yet been brought into full play. As the press escalates for a fairer income distribution system in China, individual income tax, an ideal channel for correcting further polarization of wealth, has been brought to attention. Although being amended several times in the past, much room is still left of tax for further improvement that can better adapt to and serve the current needs of Chinese economy and society. Thus, to carefully exam China's individual income tax and evolve to a mature system is the general trend.Chapter 1 introduces the background and motivation of this research. The optimal income tax theory and China's domestic personal income tax system reform are also introduced.Chapter 2 introduces the historic changes of China's individual income tax system, and analyses the forming of individual income tax system from the perspective of public choice theory. The target of tax reform and its major determining factors are discussed as well.Chapter 3 introduces the current personal income tax system in the United States, Britain and Japan, and analyses the shortcomings of China's current individual income tax system. A framework of restructured tax system is introduced.Chapter 4 exams the theoretical and practical barriers for the China's individual income tax reform.Chapter 5 provides suggestions for tax reform from the perspective of public choice theory, and points out that a combined efforts need to be made to realize fairer income distribution in China.