Comparative Study On China's Individual Income Tax In The International Tax Competition

The paper analyzes the problem of individual income tax reform in China from a new angle of view,basing on theory and practice analysis methods.At present, international tax competition mainly emphasizes tax on macroscopic stratification, corporation income tax and export tax reimbursement,while the paper expands the emphasis to individual income tax.International tax competition involves not only tax system but also tax management and international tax coordination.The paper analyzes the good procedure of foreign countries in strengthening individual income tax,from which the profitable experience is concluded,Then the paper analyzes the problem and flaw of individual income tax competition ability in China.At last the paper points out the direction and the concrete mentality of enhancing individual income tax competition ability in China after analyzing the advantage and disadvantage of individual income tax in China and foreign countries.The international tax competition is defined as that state government carries on the measure of reducing tax rate;implementing tax preferential policy and reducing tax burden to attract international fluidity production element production and promote state economy grow.International tax competition originates from western developed countries.With international economy integration and information technology high-speed development,more and more countries,no matter developed countries or developing nations,have involved in international tax competition.Because very country has different condition,standpoint and view to tax competition are various. The developed countries,especially European Union member countries,generally hold the opposition attitude to international tax competition.The developing nations have taken many measures in taxation to develop economy,but it is impossible for them to reduce tax rate constantly and implement tax preferential policy because of the limit of financial resource.Tax competition essentially is tax system competition,and the strong and the weak of tax system competitive ability decide the strong and the weak of tax competitive ability.There are many factors influencing tax international competitive ability.The factors include tax system just degree,tax burden level,tax preferential benefit degree and way,as well as tax administration level and international tax coordination level and so on,which happens on individual income tax too.In these factors of influencing individual income tax competitive ability,just tax system is the foundation;tax burden level is the core and tax preferential measure is the key. International tax coordination level also affects the competitive ability.From the influence of globalization to tax level and structure,the international tax competition is not merely limited to the competition of active capital but also includes the competition of moving population.It is very important and urgent for the developing nations to study how to enhance individual income tax competitive ability to attract and detain the talent of high skill to promote state economy development.From the 1980s,USA reduced tax continuously,which attracted massive funds and talents to USA,promoting state economical development.The other countries also carried on tax reform plan affected by USA.The substance of the reform includes formulating tax reducing plan,opening up tax base,optimizing tax system and strengthening tax administration.From then on,many countries involved the reducing-tax tide.The individual income tax reform in other countries gives us the enlightenment that tax system reform should be based on theory innovation and strategic thought,and marge tax rate should be low.With the high-speed development of social economy in China,the Individual Income Tax System of China,which was revised in 1994,has exposed some problems. The individual income tax is far inferior to corporation tax and customs duty in attracting foreign capital and talents.In view of individual income tax system itself, the international tax competitive ability is also very weak which impedes attracting talents and fund,and so on.Firstly,the marge tax rate is excessively high,which not only influences the work enthusiasm of people but also not favor the attraction of outstanding talents and even causes the brain drain.Meanwhile the regressive of progressive tax rate has the reversion control action to the income disparity.Secondly,the expense deduct is not reasonable.The content of expense deduct is incomplete and has not considered the difference of tax payer.The standard of expense deduct is fixed to be invariable for a long time,while the tax burden of tax payer is increasing unceasingly with price index rising.The design of expense deduct dose not favorite the expanded reproduction of human capital.Thirdly,the goal of tax preferential policy is fuzzy.From the whole tax preferential policy,there is a few policy of attracting talents and the tax preferential policy system of attracting talents has not established.Moreover the preferential policy of stimulating the senior talents to start an undertaking and research is fewer.Fourthly,the cost of taxation is high,and the structure among the cost of tax legislation,taxation and tax payment,is not reasonable.The scientific nature of tax legislation is limited because the tax legislation cost share is small in particular.Fifthly,the individual income tax system can not solve the problem effectively of double taxation to dividend,which influences the investment enthusiasm of investor.In order to strengthen the international competitive ability of individual income tax in China,several policy proposals are put forward in the paper.Firstly,individual income tax rate should be design again,reducing the highest marge tax rate and optimizing tax rate structure.In order to adapt the international tendency of individual income tax reform,the tax rate level distance may be reduced, implementing lower progressive tax rate.The tax rate may be designed to five levels progressive tax rate of 5%,10%,20%,28%,and35%.The income not levied by synthesis continues to be levied by 20%.Secondly,the method and the content of expense deduct should be adjusted, formulating the practical expense deduct standard and introducing family difference deduct,medical expense deduct and education expense deduct.The adjustment should reflect the principle of fairness,profit and convenience.Thirdly,the tax preferential policy should be reformed.The ordinary foreign individual should not get more tax preferential policy than the citizen in China,but expect high skill talents that should enjoy more tax preferential policy.The tax preferential policy on promoting advance in technology should be paid more attention. The concrete form of tax preferential policy should be changed to bring about the anticipated effect of tax policy. Fourthly,the tax administration should be enhanced.The tax authority should improve the systems of individual income records management,tax entrusting payment and deduction itemized account system,two directions tax declaring of payer and payee system and tax coordinating system.Meanwhile the information construction of individual income tax should be strengthened.The government should establish and consummate the related necessary measure as soon as possible.The measure includes establishing property registration system,consummating deposit solid famous system,fixing resident identification card number to tax payment number system forever and implementing financial property solid famous system.At the same time,the attack to evading tax should be enlarged to guarantee tax legality.Fifthly,some measures should be taken to eliminate multiple taxation of dividend.According the overall request that efficiency is the first and the fair is pay to attention at the same time,the way of cost deduct in individual capital should be used, following the principles of economy grow,society stability,administrative efficiency,tax neutrality and moderate elimination,which is the reality choice to eliminate multiple taxation of dividend.Sixthly,we should try to enhance international tax coordinated ability of our country.We should develop the tax coordinated relations with other countries especially developing nations on the base of equality and mutual benefit, strengthening tax cooperation and information exchange and eliminating the bad influence from international tax competition.Through the measures,international tax competition ability of individual income tax of our county will be enhanced and individual income tax of our county will be in an impregnable position in international tax competition.