Research On Ameliorating China's Personal Income Tax System

Personal income tax is one levied on the amount of taxpayers'income. It is among the most important types of taxes in many countries, and China's fastest growing type. With the increasing number of taxpayers, personal income tax plays a more and more role in socio-economic life. Over the years, academics in the theoretic field have made exploratory analyses of personal income tax from different perspectives and reached some consensus. However, there has not been any agreement yet in many issues concerning taxation regime models, tax rate, expenses rebate. Besides, numerous drawbacks have persisted in China's system of personal income tax, some of which are serious institutional ones and have not yet been fundamentally solved through several reform attempts. Without a radical reform and amelioration of personal income tax system, its functional role will be seriously discounted. Motivated by the unsatisfactory status quo, and equipped with his years' research experience and knowledge of practices in personal income tax, the author chooses to examine personal income tax system as his thesis research topic. The thesis aims to fully map out and examine the system in question so as to dig out basic problems therein, and their underlying causes and conditions, thereby making relevant proposals for how to ameliorate it under the classified comprehensive taxation regime.The analysis result shows that the reform objective should aim at a system whereby classified comprehensive taxation regime is practiced and developed towards expanding moderately the scope of taxation, lowering the tax rate, enlarging expenses rebate, improving tax-collecting administration and supporting measures, so that a new system can allow for low-income taxpayers to reduce their tax burden, and high-income taxpayers to pay a reasonable tax rate, to the effect that the new system is sufficient in its income distribution adjustment function and efficient in tax-collecting administration.The body of the thesis is structured into five parts. Part One is Introduction, consisting of two sections. They are theoretical overview, China and beyond, and research methodology, contents, and originality respectively. The overview of foreign theories presents the concept of income, the shift from separation to integration of equity and efficiency in personal income tax system and the evolutionary change in taxation model, while that of domestic theories focuses on mapping out and analyzing different views about personal income tax in the hope to understand equivalent theoretical research developments in China. In this section, the analysis entry point of the present research is introduced, historical analysis, contrast analysis, data analysis are presented as its analysis methods, and taxation regime models of personal income tax, expense rebate, tax rate design and taxation administration are outlined as its main issues to be discussed. This section ends with the originality of the thesis. The originality is represented by three points; they are views of limited household expense rebate, reverse wealth and capacity-to-consume taxation assessment mechanism, and political institutional reform as a precondition for advancing the basic improvements of personal income tax administration.Part Two presents the developments and current situations of personal income tax system in China. Main points include the developments of personal income tax since the Qing Dynasty, and the current situations of its fast growth, improved weight in taxation, satisfactory functional performance in equitable distribution, and some progress in administration level of taxation.Part Three analyzes drawbacks of personal income tax system in China. The model of personal income tax system, contents of its substantive law, contents of its procedure law and socio-economic package measures with personal income tax are separately dealt with. The one-after-another analyses have revealed numerous problems with the classified taxation model, including weakening capacity of personal income tax to adjust income equity, narrow taxation scope, rather high tax rate, unreasonable tax brackets, tax-collecting administration loopholes.Part Four is insights from analyzing personal income tax practices in other countries. The comparative study of five types of taxation models for their respective benefits and drawbacks, evidenced with representative countries'practice data, has yielded some useful insights for China.Part Five is about measures for ameliorating China's personal income tax system. The necessity of practicing a classified comprehensive taxation model is arguably defended by following principles of taxation legalization, integrated equity and efficiency, meeting the needs of fiscal revenues, and progressiveness. Proposals are made to take some external supportive measures respective of substantive law and procedure law for ameliorating personal income tax, extend the scope of taxation towards levying taxes on proceeds from share transfer, increase family-raising expenses rebates, expand the composites of comprehensive income, strengthen and deep-compartmentalize expenses rebates system, narrow the gap between tax brackets in progressive tax system, increase the amount of low-tax-rate-bracket income, lower marginal tax rate. Other proposals include strengthening capacity to utilize Internet resources, and improving administrative level of personal income tax. Measures are to be taken for political institutions reform, initial distribution system reform, and comprehensive social governance tax, so as to create conditions for ameliorating personal income tax system.