Individual Income Tax Evasion And Countermeasures In China

With the steady development of the economy in China, individual income tax has constituted an important part of China's revenue and adjust economic and social harmony. On the whole, individual income tax is academically regarded as one of the most difficult to be mastered and administrated in the world. In developed countries the inaccurate amount of reported individual income tax, accounts only for 10 percent of the amount that should have been levied. In the primary stage of socialism, China's marketing economy is not mature enough and the individual income tax inaccurate is rather rampant. The inaccurate manifest themselves in the three fields. They are: 1.Wag salary income tax evasion. 2. Self-employed owners of the enterprises falsify account information by expenditure their personal income into enterprise's cost. 3. For tax-dodging purpose the employers pay their employees for times by dividing their earnings into parts which is lower than the starting levy standard. 4. A great deal of grey or illegal income is paid in cash. Therefore, if effective measures are not instituted to prevent individual income tax from evasion, a serious negative bearing will befall the distribution of national revenue, restructuring of resources and arrangement of finance.The reason for individual income tax evasion varies in different ways. But the deficient or leaky of taxation administration system is mainly responsible. As far as the system itself is concerned, the leakage includes: category income tax model; collection and management of ownership rights; the determination of the tax base; the design of tax rate; tax collection and management method.To prevent the individual income tax from further being evaded, it is suggested that the classification and integrated taxation model should be conducted. Government must strengthen the measures to adjust the individual income taxation. Reform the current deducted method and conduct variant measures to levy less tax expenditure for basic life of the tax-payers and conduct special deduction standard. Also lower the marginal tax rates and reasonable design the progressive level of individual income tax. Establish more strict and effective taxation collection and management mechanics, and raise the individual income tax collection and management level.