Improving The Personal Income Tax System And Promote The Equitable Distribution

Personal income tax arose in the end of 18 century. Since then, it has a rapid development. Today it is playing an important role in achieving government's social and economic objectives. In today's China, personal income tax is one of the most important taxes that are used to achieve income redistribution, but some of its limits make it failed to redistritute income effectively. The purpose of this paper is to investigate the personal income tax systems reformation that will improve the equality of income distribution. This paper contains qualitative analysis and quantitative analysis, theoretical analysis and applications, and international comparison. My basic ideas and conclusions are:1. Our country is establishing a market economy and try to improve it.the problem of income distrbution inequality has inevitably appeared in this procedure and the worsened income distribution has threatened the social stability. To maintain the social stability and have an orderly market economy, our government must use personal income tax to adjust the income distribution.2.Gini coefficienct is a usual index to measure the inequality of income distribution. Some investigate show that our Gini coefficient is rather big. This implies that our income distritution has been worsened obviously. And some studies show that the proper use of personal income tax system can be used to decrease Gini coefficient. This effect is the intrinsic function of personal income tax system.3. By analyzing the history of our personal income tax system envolvement and its present situation, we find some causes of the personal income tax failing to adjust income ditribution. The most important and fundmentai one of them is that the design of the tax system is not consistent with the principles of equity and efficiency. The loophole and limits of this system nessitate to reform and improve our personal income tax system.4. The international comparison of tax elements, such as personal income tax policy objectives, tax-mode, taxpayer, tax computation,tax rate setting, collectionand regulation mode, etc, reveals the development trend of personal tax system. It can be used to concuct our personal income tax system improvement.5. According to our present situation, combining foreign countries' experiences and modern tax theory, we should make the equality and efficiency properly combined to reform and to improve our personal income tax system. The specific measures are: clarification of the objectives of personal income tax system design, aggregate and classified taxing mode, broaden tax area, scientific tax base determination, reasonably designed tax rates, collection and regulation mode modernization, making the right belong to central government to make it a sharing tax, etc.6. To make the personal income tax system to be effective in adjusting income distritution, we must improve the general tax system in which the personal income tax plays a dominant role.This paper contains the following innovative idea: First, the improvement of personal income tax system should be judged by the degree of income equality, and that this principle should has a rather big weight in the design of the personal income system and fundmental elements of tax ; Second, I suggest that the right of personal income tax should be belonged to central government, central government and local government share the use of the tax revenue. This is nessisary for the consistency between sharing tax system and international tax relations, for the proper balance of equality and efficiency.